required Sea Transportation (1) Current Development Program

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1 4.1.8 Sea Transportation (1) Current Development Program For Indonesia, the biggest archipelago country with over 17,000 islands stretching 5,000 km from east to west, and 2,000 km from north to south, sea transportation plays an important role as a gateway for cargoes and passengers to and from foreign countries and other islands. On the other hand, transportation on rivers, lakes and sea crossings (ASDP) are classified as part of the land transport system. In this sense, the ports function as the connection of the sea/river/lake transportation with the road/railway transportation. In order to meet the increasing demand of cargo and passenger along the national economic growth, development and improvement of port facilities, navigation system, shipping industry and port management institutions are urgently required. 1) Current Development Program a) Current RPJM The key issues of sea transportation and river/lake/ferry transportation are mentioned in the current RPJM , as follows: (Sea Transportation) i) Decline in the share of the national shipping fleet in the transportation cargo ii) High-cost of cargo handling charge iii) Inadequate port infrastructure and facilities iv) Poor quality of navigation facilitation instruments compared with the international standards v) Controversy on the authority for managing sea-ports between the central government and regional governments. (River/Lake/Ferry Transportation) i) Inadequate and limited ferry infrastructure and facilities ii) Limited availability of vessels iii) Inadequate and limited transportation network iv) Indefinite role between private company and regional government To address the above mentioned key issues, programs are enumerated below: (Sea Transportation) i) Program for the Rehabilitation and Maintenance of Sea Transport Infrastructure ii) Program for the Construction of Sea Transport Infrastructure iii) Program for the Restructuring of Sea Transport Institutions and Regulations (River/Lake/Ferry Transportation) i) Program for the Rehabilitation of River, Lake and Ferry Wharves Republic of Indonesia 4-83 March 2010

2 ii) Program for the Development of River, Lake and Ferry Transportation Infrastructure and Facilities iii) Program for the Restructuring and Reforming of River, Lake and Ferry Transportation Institutions b) Current Development Blueprint for Sea Transportation The MOT, mainly the Directorate General of Sea Transportation (DGST) has formulated the Development Blueprint for Sea Transportation based on the National Transport System (SISTRANS). The policies of the blueprint are: i) To increase national maritime transport services, ii) To increase safety and security of the national maritime transport, iii) To increase utilization of maritime transport development, iv) To increase quality of human resources, science and technology in maritime transport sector, v) To increase maintenance and environmental quality and energy efficiency in maritime transport sector, vi) To increase provision of maritime transport development fund, and vii) To increase the quality of the state administration of maritime transport sub-sector. 2) Budget Allocation in In 2008, the national budget of transportation sector under the MOT was Rp. 12,217 billion in 2008, of which Rp.3,527 billion was allocated for sea transportation. As to the amount of budget, sea transportation is the sub-sector with most allocated budget (Sea: 29%, Railway: 26%, Air: 21%, Land: 13%, Others: 11%). Figure shows the planned and realized budget for sea transportation ( ). Both budget and its realization ratio have been sharply increasing since Source: Finance Bureau, Ministry of Transportation Figure National Budget (APBN) for Sea Transportation Republic of Indonesia 4-84 March 2010

3 (2) Progress of Development The status of achievements of the sea and ASDP (River/Lake/Ferry) transportation sector under the current RPJM are shown in Table and Table , respectively. Table Achievements of Sea Transportation Sector in RPJM Target/Program Indicator Unit Improving the market segment of the national shipping vessels both for domestic and import export sea transport Improving the performance and efficiency of ports that managed State Owned Enterprises (BUMN)* Compliance of the shipping navigation equipments and maintenance facilities Numbers of domestic sea transport Numbers of overseas sea transport Cargo loading and unloading flow Port container flow Vessel Traffic Services (VTS) Issuance of the Law Completion of the Law No.21 Year 1992 on the Shipping and Issuance of Government Regulation No.69 Government on the Ports Regulation Source: RPJM Evaluation Book Million ton Percent Million ton Percent Million ton Million TEU Initial Condition 2004/ Unit Pharos Unit Floating light Unit Light buoy Unit 1,192 1,236 1,216 1,244 Rough Draft of Draft of Law Achievement Draft of Law Rough Draft of Gov. Regulati on Law Draft of Gov. Regulati on Table Achievements of River/Lake/Ferry Transportation in RPJM Target/Program Indicator Unit Improvement of quays infrastructure to increase the number of new ferry transport which is ready to operate or increase the capacity of the dense/crowded ferry transport Improvement of feasibility and numbers of ASDP facilities Numbers of constructed quays Construction of crossing beacon Initial Condition 2004/2005 Achievement Unit Unit Numbers of lake quays Unit Rehabilitation of lake quays Unit Rehabilitation of river quays Unit Rehabilitation of Crossing Vessels Unit Crossing beacon Unit Improving the ASDP safety Inland and River beacon Unit Source: RPJM Evaluation Book Republic of Indonesia 4-85 March 2010

4 (3) Remaining Issues 1) Key Remaining Issues for the Next RPJM According to the draft concept of the next RPJM , BAPPENAS addressed the following remaining issues. (Sea Transportation) i) Low portion of national flag fleet ii) No national port master plan and limited number of international ports iii) Low level of reliability/adequacy of port and navigation facilities iv) Limited funds and lack of investment by the private sector v) High cost of cargo transportation vi) Low performance of port activities due to the lack of port facilities vii) Lack of human resources in the sea transportation sector (River/Lake/Ferry Transportation) i) Lack of navigation route and infrastructure to meet the demands ii) Lack of vessels and existence of overly aged vessels iii) Insufficient institutional system and indefinite role among central government, local government and state-owned company iv) Limited affordability in remote areas 2) Indonesia s Competitiveness in the Current Sea Transportation Sector a) Position of Indonesian Container Throughput among Neighboring Countries Table shows the container throughput and its world ranking among the Asian countries in recent years. This was summarized from the source entitled Containerization International Yearbook In 2007, container throughput of Indonesia was 4,481 thousand TEU, and it was 23rd in the world ranking. Figure indicates the container throughput trend of Indonesia and its neighboring countries (namely Malaysia, the Philippines, Thailand, Vietnam and India) ranked as 50th in the world, Republic of Indonesia 4-86 March 2010

5 Indonesia Malaysia Philippines Thailand Vietnam India China Table Container Throughput and Ranking in Asian Countries Container Throughput (1,000 TEU) Country ,920 2,233 2,102 3,864 3,492 4,540 4,560 5,567 5, ,976 3,015 3,942 4,612 6,225 7,542 10,072 11,264 12, ,507 3,167 2,813 3,605 3,091 3,271 3,469 3,673 3, ,100 2,639 2,892 3,269 3,382 3,801 4,410 4,856 5, ,291 2,196 2,139 2, ,803 1,829 1,762 2,314 2,591 3,243 3,916 4,267 4, ,365 24,729 28,215 35,483 43,970 55,717 61,621 74,540 88, ,892 10,228 11,796 13,621 12,981 13,501 14,567 15,937 16,777 Japan Source: Containerization International Yearbook Source: Containerization International Yearbook Figure Container Throughput Trend in Asian Countries India and Thailand have been steadily increasing the throughput and their average growth rate ( ) was 15.1% and 11.4%, respectively. The Philippines has been gradually increasing their throughput with an average growth rate of 4.4%, although its ranking has been falling. Vietnam has been rapidly increasing their throughput along the economic growth with the Doi Moi economic reforms. Several container terminals financed by the private sector have been constructed around Ho Chi Minh to immediately meet the increasing demands. The container-handling companies, PSA Corporation Ltd., SSA (Stevedoring Services of America), and APM Terminals, which are the so-called the mega operators, have already started business in Vietnam. Republic of Indonesia 4-87 March 2010

6 Malaysia has sharply increased since Tanjung Pelepas Port started its operation as a privatized port in Now mega carrier, Maersk Line, is the largest user of the port. Said port is the most convenient and controllable container terminal for Maersk Line as its hub in Asia, replacing Singapore. Container throughput of the port in 2007 was 5,500 thousand TEU, which is 37 % of the whole of Malaysia. Indonesia steadily increased their throughput by 2004 and has ranked 14th, but it suddenly decreased throughput to 3,740 thousand TEU in 2006, causing its rank to fall to 23rd. In 2007, Indonesia recovered their throughput to 4,481 thousand TEU which is the level in As to the average growth ratio of container throughput ( ), Indonesia has 8.9%. However, its numerical value is insufficient, as compared to above mentioned neighboring countries, namely Malaysia (17.5%), Thailand (11.4%) and India (15.1%). b) Container Handling Cost in ASEAN Countries Terminal handling charge (THC) consists of container handling charge and surcharge. In Indonesia, container handling charge was greatly discounted on November Nevertheless, THC is comparatively high among ASEAN countries due to costly surcharge as shown in Table Figure indicates that surcharge proportion of the Indonesian gateway Port, Tanjung Priok Port is relatively high. Container replacement and stocking in the yard or in temporary custom warehouse additionally charge shippers/consignees for surcharge, since Tanjung Priok Port yard area is inadequate. In general, transportation cost to and from the port is generally a heavy burden to both consignees and consignors. Logistic conditions such as cost, speed and security are the most important factors for the foreign investors. In order to promote the foreign investment, which in turn result in the development of the national economy, high-performing and economical freight transportation are essential. Table Terminal Handling Charge of Asian Countries (Unit: USD) Country Dry Container Ref. Container 20' 40' 20' 40' Document Indonesia Brunei N/A N/A N/A Cambodia Malaysia Philippine N/A N/A N/A Singapore Thailand N/A N/A 16 Vietnam N/A N/A 4 Source: ASEAN Logistic 2008 Republic of Indonesia 4-88 March 2010

7 Source: OCDI Quarterly 68 Figure Interrelation between Terminal Handling Charge and Container Handling Charge of Main Ports in Asian Countries 3) Sea Transportation Sector by Island a) Strategic Ports There are around 2,100 ports in Indonesia which is an archipelago of over 17,000 islands stretching 5,000 km from east to west and 2,000 km from north to south. These ports are either categorized as commercial port under the control of PT Pelabuhan Indonesia, or non-commercial port under the control of Technical Operation Unit of DGST. MOT designated 25 strategic ports among the commercial ports, which support the national and regional economic activities. Furthermore, MOT designated four main ports as gateway ports for container cargoes. Figure indicates the location of strategic ports including the main ports by island, and Table indicates the cargo throughput these ports. In 2008, total cargo throughput the strategic ports was 281 million tons, of which 95 million tons are for export, 32 million tons for import and 154 million tons for domestic loading and unloading. Republic of Indonesia 4-89 March 2010

8 Sumatra Island Lhokseumawe Belawan Batam and Bintan Island Batam Kalimantan Island Pontianak Samarinda Sulawesi Island New Guinea and Maluku Islands Bitung Sorong Dumai Pekanbaru Tanjung Pinang Banjarmasin Balikpapan Makassar Biak Jayapura Teluk Bayur Ambon Palembang Panjang Banten Bojonega Jawa Island Tanjung Lesser Sunda Islands Tanjung Tanjung Priok Emas Perak Benoa Tenau/Kupang Note) Main Port is mentioned by Bold Frame Source: JICA Study Team Figure Location of the Strategic Ports by Island (Area) Island Sumatra Kalimantan Java Sulawesi New Guinea and Maluku Islands Batam and Bintan Lesser Sunda Islands Table Cargo Throughput of Strategic Ports in 2008 Port Export Import Domestic Total Container (Strategic Port) (Ton) (Ton) (Ton) (Ton) (TEU) Lhokseumawe 8,291, , ,169 8,767,744 0 Belawan 4,789,945 1,291,582 8,586,909 14,668, ,907 Dumai 12,044, ,822 12,306,820 24,834,702 0 Pekanbaru 816, ,752 3,306,403 4,291,615 22,972 Teluk Bayur 1,687, ,131 6,354,233 8,337,426 39,600 Palembang 1,678, ,629 10,238,939 12,271,451 46,037 Panjang 4,296, ,159 8,342,502 13,359,336 89,896 Pontianak 717, ,755 4,162,523 5,400, ,163 Samarinda 13,735,003 42,761 4,404,525 18,182, ,478 Balikpapan 14,272,852 4,569,262 27,685,142 46,527,257 77,077 Banjarmasin 19,834,249 31,085 6,195,903 26,061, ,848 Banten 31,347 1,588,297 3,068,044 4,687,688 87,963 Tanjung Priok 6,023,350 12,905,581 19,352,783 38,281,714 3,531,058 Tanjung Emas 293, ,283 5,732,763 6,498, ,970 Tanjung Perak 856,936 5,857,771 20,353,709 27,068, ,705 Bitung 556,586 18,844 1,140,505 1,715, ,090 Makassar 1,426, ,664 2,937,102 5,061, ,833 Sorong 76,669 5, , ,605 15,796 Biak N/A Jayapura , ,675 24,191 Ambon 7, , ,334 37,409 Batam 1,134,123 2,150,028 3,980,041 7,264, ,977 Tanjung Pinang 2,583,480 12,221 1,197,844 3,793,545 0 Benoa 0 0 1,002,148 1,002,148 37,508 Kupang , ,931 19,265 (Total) 95,155,609 32,333, ,476, ,965,838 6,735,742 Source: DGST, Ministry of Transport Republic of Indonesia 4-90 March 2010

9 b) Sea-born Cargo Throughput by Island In 2007, total cargo throughput of commercial and non-commercial ports was 620 million tons, of which 203 million tons (33%) were handled in Sumatra Island, 214 million tons (34%) in Kalimantan Island, 146 million tons (24%) in Java Island, and 58 million tons in other islands. Figure shows the cargo throughput of commercial and non-commercial ports by island. 140, , ,000 Domestic (Unload) Domestic (Load) Import Export (1,000 ton) 80,000 60,000 40,000 20,000 0 Sumatra Kalimantan Java Sulawesi New Guinea and Maluku Islands Batam and Bintan Lesser Sunda Islands Source: Transportation and Communication Statistics 2007 Figure Cargo Throughput of Commercial and Non-Commercial Ports by Island c) Origin and Destination of Main Commodity by Sea Traffic Domestic origin-destination flows of main commodities, namely petroleum, general cargo, coal, wood, fertilizer and cement, are shown in Figure Most of the commodities, which are produced in Kalimantan and Sumatra Islands, concentrate on Java Island. Transportation between islands, excluding Java Island, is not so remarkable except for petroleum products. Republic of Indonesia 4-91 March 2010

10 Petroleum General Cargo Coal Wood Fertilizer Cement Source: STRAMINDO 2004 Figure Origin and Destination Flows of Main Commodities d) Inland Cargo Transportation Mode by Island Cargoes have been transported by several modes, namely sea, road, railway and air. In 2006, the total inland cargo transportation was 9,176 million ton-km, of which 8,579 million ton-km (93.5%) was by road, 574 million ton-km (6.3%) by sea/river, 21 million ton-km (0.2%) by railway and 2 million ton-km (0.02%) by air. Figure shows the modal share by inland transportation. In Sumatra, Java and Lesser Sunda Islands, road transportation is the major mode of transportation. On the other hand in Kalimantan, Sumatra, Papua and Maluku Islands, sea/river transportation plays an important role in place of road transportation. Sumatra and Kalimantan produce coal, which is mostly transported by river. Thus, the share of sea/river transportation is greater. Republic of Indonesia 4-92 March 2010

11 Road Indonesia Sea Railway and Air Sumatra Java Kalimantan Sulawesi New Guinea and Maluku Islands Lesser Sunda Islands 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: BAPPENAS Figure Modal Share of Inland Cargo Transportation by Island 4) River Transportation In 2008, coal production volume of Indonesia was 187 million tons, of which 139 million tons is for export according to the Directorate General of Geology and Mineral Resources. Mineral fuel, which is mainly composed of coal, is the vital export material in Indonesia. In 2008, it amounted to USD 10.7 billion by FOB price, and its portion in the total export amount was 7.8 %. Most of the coal mines are located in the mountainous areas of Kalimantan and Sumatra Islands. Majority of coal companies built exclusive coal-handling terminals along the rivers, namely Barito River, Mahakam River in Kalimantan Island, and Musi River in Sumatra Island. Figure indicates the coal transportation flow. Based on national conditions around the coal mines, river transportation system is the most efficient and economical transportation mode for bulk cargoes such as coal. The rivers play the most important role for coal transportation. However their width, depth and navigation system are insufficient. Improvement of the river as a canal for safety and efficient coal transportation is required to meet the increasing demand. Republic of Indonesia 4-93 March 2010

12 Coal Mine Road/Railway Coal Terminal at River Barge Offshore Tranship Point Barge Barge/Vessel Road/Railway/Belt Conveyer Barge Coal Terminal at Sea Barge/Vessel Land Transportation River Transportation Sea Transportation Source: JICA Study Team Figure Coal Transportation Flow in Kalimantan and Sumatra Islands 5) General Issues of Current Sea Transportation Sector a) Port Development of Strategic Ports The development strategy for the national sea transportation mentions the medium and long-term development plans for strategic ports as shown in Table As to the progress of each development plan, Bitung Port, Makassar Port, Kupang Port, Dumai Port, Tanjung Priok Port, Samarinda Port and Tanjung Perak Port have completed their master plans. Batam Port and Tanjung Emas Belawan Port, meanwhile, have completed draft master plans. Other ports are in the preparation stage of their master plans. Republic of Indonesia 4-94 March 2010

13 Location Sumatra Kalimantan Table Medium and Long-Term Development Plan of Strategic Ports Port Medium and Long Term Development Plan Lhokseumawe Stay Stay Belawan Development of the berth Development as an international hub port Dumai Development after appropriate demand Equipment of the container crane Pekanbaru Development after appropriate demand Relocation of the port Teluk Bayur Development after appropriate demand Extension of the berth up to 500m and equipment of additional crane Palembang Development after appropriate demand Development after appropriate demand Panjang Equipment of crane as required and the Extension of the berth up to 750m joint use with the international terminal Pontianak Development after appropriate demand Extension of the berth up to 750m Samarinda Extension of the berth (837m to 2,100m) Additional Extension of the berth up to 3,100m Balikpapan Stay Extension of container berth (590m to 750m) with a crane Banjarmasin Development after appropriate demand Development of container berth as required Banten/Bojonegar Operation of container berth Management by newly established body Java Tanjung Priok Conversion of the conventional berth Additional extension of the container berth Tanjung Emas Stay Extension of the berth up to 500m Tanjung Perak Conversion of the conventional berth Additional extension of the container berth Bitung Preparation of an t international hub port Development as an international hub port Sulawesi Additional Extension of the berth up to Makassar Extension of the berth (2,420m to 3,500m) 5,300m Sorong Extension of the berth (280m to 500m) Additional Extension of the berth up to 800m New Guinea Additional Extension of the berth up to Biak Stay and Maluku 890m Island Additional extension of the berth up to Jayapura Extension of the berth (303m to 530m) 890m Ambon Stay Development of semi-container berth Conversion of conventional berth to Development as an international hub port Batam Batam and container as required (priority) Bintan Additional extension of the berth up to Tanjung Pinang Extension of the berth (540m to 800m) 1,200 m Lesser Sunda Benoa Stay Stay Islands Tenau/Kupang Stay Development as an international port Source: Development Strategy of National Sea Transportation b) International Gateway Port of Indonesia Tanjung Priok Port plays an important role as the international gateway and logistics center to support economic activities, and handles container cargos of over 50% of the whole ports of Indonesia in According to the previous JICA Study on PPP strategy for the port, container throughput capacity of Tanjung Priok Port is estimated to be around 4.1 million TEU, of which about 1.5 million TEU is for domestic cargoes under the condition that the rehabilitation project is completed. Cargo handling capacity will overflow along with the steady cargo growth in the near future as shown in Figure Currently, Tanjung Priok Port has problems on the inadequacy of yard area and serious truck traffic congestion, since the port is located in an urban area. In order to meet the future cargo demands and to boost the national economy, a new container terminal development, in cooperation with the present Tanjung Priok Port, is urgently required. Republic of Indonesia 4-95 March 2010

14 Future Handling Capacity Source: JICA Study Team Figure Container Cargo Throughput Record and Forecast of Tanjung Priok Port c) Navigation Safety and Security The number of marine incidents has been increasing over the recent years as shown in Figure , with technical errors as major causes of such incidents. In order to reduce said incidents and to maintain navigational safety and security, improvement of the navigation system/facilities, technical enhancement of sailors, and maintenance of vessels are urgently required. As explained in Table , the navigation aids of Indonesia are insufficient as compared with Japan. In 2006, 102 burglar incidents blamed on piracy or armed gangsters were reported in Southeast Asian waters, of which 83 occurred within Indonesian jurisdiction. Guard boats, therefore, have an important role to keep security in Indonesian waters. Source: Ministry of Transport Figure Marine Incident ( ) and Its Cause (2007) Republic of Indonesia 4-96 March 2010

15 Table Navigation Aids of Indonesia and Japan in 2007 Item Indonesia Japan Patrol Boat Navigation Sign 2,071 5,385 Navigation Boat Guard Boat 565 N/A Source: Transport Sector of Indonesia (Japan Embassy) d) National Shipping Industry In 2008, production by national vessels in domestic transportation was 193 million ton, which is 79% of the total production. Both productions and their portions have been increasing over the recent years as shown in Figure On the other hand, production by national vessels in international transportation was 38 million ton, which is 7% of the total. These have likewise been increasing over the recent years as shown in Figure However, it is still considered minimal. Source: Transportation Statistics 2008 Figure Production by National/Foreign Vessels in Domestic Transportation Source: Transportation Statistics 2008 Figure Production by National/Foreign Vessels in International Transportation Republic of Indonesia 4-97 March 2010

16 In 2008, the cabotage principle was implemented, which requires that all commodities such as palm oil, vegetables, and other farming products to be exclusively transported by national ships. Later in 2009, it is also expected that liquid as well as dry bulk cargos and also LNG should all be transported by national ships. Moreover, starting from 2010, coal cargos should be serviced by local ships as well. From 2011, all offshore activities are also supposed to utilize the national ships. By this gradual policy, all national commodities will be transported by national ships by On the other hand, the number of aging Indonesian vessels is relatively high as shown in Figure About 38% out of the total number of vessels already exceed the general vessel life span of 25 years, and are mostly not well-maintained. In order to reduce occurrence of marine accidents, and to meet the customer s needs, relatively newer vessels with adequate quality is required Bulk Container GenCargo Over Source: Ministry of Transport Figure Age Distribution of Indonesian Fleet In accordance with the President s Instruction (INPRES) No.5/2005 regarding the cabotage principle, the procurement of new vessels and used vessels which are not too old is required. To meet the demand for such requirement, domestic shipping companies, especially for small and medium scale enterprises, require available resources for financing. In this sense, the Public Ship Finance Program (PSFP) utilizing ODA funds was proposed by JICA (former JBIC) in Republic of Indonesia 4-98 March 2010

17 (4) Action Plan to Address the Issues 1) The next RPJM BAPPENAS addressed the following policies and strategies to resolve the previous issues in the draft concept of the next RPJM : (Sea Transportation) Policy i) Improvement of quality, service and navigation safety ii) Improvement of the accessibility for service in outer and remote areas. iii) Promoting competition and widen opportunities to private and public sectors engaged in sea transportation implementation. iv) Accommodating the development of multimodal carrier. v) Technology development and compliance with international standards. Strategy i) Building the integrated service system (single window) in ports. ii) Development of facilities in strategic ports. iii) Delegation of the management system of feeder ports under the control of local governments, in order to reduce the range of supervision and number of employees. iv) Development of port infrastructures under the control of province/district. (River/Lake/Ferry Transportation) Policy i) Improvement of safety and quality of infrastructure and facilities management and transportation ii) Enhancement of capacity and improvement of services to keep smooth traffic iii) Increase in accessibility to services iv) Encouraging the role of the government and the private sector 2) The next RENSTRA MOT addressed the following strategic program on RENSTRA in consideration of said issues and current water transport conditions. Contents of the programs are: (Sea Transportation) i) Development of a maritime facility in isolated areas; ii) Pioneer services in 19 provinces (90 lines); iii) Development of Belawan Medan Port and other eco ports; iv) Development of maritime safety facility; v) Improvement of maritime facility in security due to the implementation of ISPS Code; vi) Development of passenger ship in Central and East Indonesia; Republic of Indonesia 4-99 March 2010

18 vii) viii) Development of international hub port in the West and East of Indonesia; Improvement of safety sea transportation; (River/Lake/Ferry Transportation) i) Development of facility for river/lake/island crossing; and ii) Transportation services of pioneer crossing for 92 routes in the whole of Indonesia 3) Action Plan to Address the Issues In order to address foregoing issues, the study team proposed the action plan based on water transportation development policy/strategy and current conditions as shown in Table and Table Table Action Plan on Sea Transportation Sector (including ASDP) Issues Action Plan 1. Strong Economic Growth 1.1 Building Strong Backbone Infrastructure (DKI Jakarta) Insufficient Water Transportation Service 1) Insufficient port facility and equipment 2) Insufficient cargo handling capacity 3) Limited container yard 4) Insufficient service for port user 1.2 Upgrading Infrastructure in the Main Cities Insufficient Water Transportation Service 1) Insufficient port facility and equipment 2) Insufficient cargo handling capacity 3) Insufficient service for port user 4) Incomplete ferry network 5) Inadequate river canal facility 2. Poverty Reduction 2.1 Provision of Basic Infrastructure Services in Depressed Areas Regional Disparity of Water Transportation Service 1) Inadequate port facility 2) Regional disparity of sea transportation network 3) Incomplete accessibility to isolated areas 3. General issue and Nation wide 1) Vulnerable institution/ organization 2) Increase in maritime accident 3) Burglar incidents 4) Incomplete environment control system by port operators 5) Over-aged vessels Source: JICA Study Team a) Improvement/expansion of port facility b) Repair/restoration of cargo handling equipment c) Development of new international gateway port d) Introduction of an effective logistic system a) Improvement/expansion of port facility b) Renewal of cargo handling equipment c) Introduction of new or lower age vessels d) Development of ferry network e) Improvement of river canal a) Development/improvement of port facility b) Development of coastal shipping for isolated areas d) Plying pioneer vessels a) Restructuring of institutions b) Improvement of safety and security equipment c) Introduction of new safety management system d) Procurement of new or lower age vessels e) Establishment of port environment management system Republic of Indonesia March 2010

19 Jakarta Table Region-wise Action Plan on Sea Transportation Sector (including ASDP) Region 1. Building Strong Backbone Infrastructure 2. Upgrading Infrastructure in the Main Cities 3. Provision of Basic Infrastructure Service in 1) Improvement/expansion of port facility 2) Development of new international gateway port 3) Introduction of an effective logistics system Java --- 1) Improvement/expansion of port facility 2) Development of ferry network Sumatra --- 1) Improvement/expansion of port facility 2) Development of ferry network 3) Improvement of river canal Kalimantan --- 1) Improvement/expansion of port facility 2) Development of ferry network 3) Improvement of river canal Sulawesi --- 1) Improvement/expansion of port facility Bali & Nusa Tenggara and Maluku & Papua Source: JICA Study Team --- 1) Improvement/expansion of port facility Depressed Areas ) Development of coastal shipping for isolated area 2) Plying pioneer vessels 1) Development of coastal shipping for isolated area 2) Plying pioneer vessels The suggested criteria for the selection of priority projects in the water transportation sub-sector are the same as that in the transportation sector. The projects should therefore focus on the following six view points: i) To support the national economy as international gateway ports or hubs (transshipment) port -Development of Tanjung Priok Port (Current international gateway port) -Improvement of Tanjung Perak Port and Makassar Port (Current sub international gateway port) -Development of Belawan Port, Batam Port and Kupang Port (Potential hub port due to strategic location) ii) To support the regional economy as strategic ports -Improvement of Dumai Port, Lhokseumawe Port, Pekanbaru Port, Tanjung Pinang Port, Palembang Port, Panjang Port, Pontianak Port, Teluk Bayur Port, Banten/Bojonegara Republic of Indonesia March 2010

20 Port, Benoa Port, Tenau/Kupang Port, Tanjung Emas Port, Ambon Port, Biak, Bitung Port, Jayapura Port, Makassar Port, Samarinda Port and Sorong Port iii) To improve the quality of ferry transportation, to keep inter-island transportation route as sea road, and to enhance the economic interchange between islands -Improvement of Banjarmasin Port, Samarinda Port, Parepare Port, Banka Belitung Port, Pontianak Port and Banjarmasin Port -Procurement and introduction of the pioneer vessel, and plying between main islands and isolated islands iv) To support mining industries through transportation -Improvement of river canal to transport mining, especially coal, products (Barito River, Mahakam River, Musi River and Other related rivers) v) To maintain navigation safety and security -Improvement of navigation aids and setting-up vessel -Introduction of navigation observation and control system (Vessel traffic system, Ship reporting system) -Procurement and retrofit of the patrol boat -Procurement assistance for relatively newer vessels through public finance vi) To preserve environment -Establishment of port environment protective system Republic of Indonesia March 2010

21 4.1.9 Evaluation of Candidate Projects in the Transportation Sector (1) Compilation of List of the Candidate Projects for Blue Book In the transportation sector, 138 candidate projects are identified for inclusion in the Blue Book, which are proposed projects subject to foreign assistance, as summarized in Table Among them, 94 are for implementation (Project Assistance), and the rest are for technical assistance for future implementation. Table List of Candidate Projects in Transportation Sector for Blue Book Sub-Sector Project Assistance Technical Assistance Total No. Amount (mil. US$) No. Amount (mil. US$) No. Amount (mil. US$) Share Road 45 11, , % Rail 24 8, , % Air 10 1, , % Sea/River 15 5, , % Total 94 27, , % Source: JICA Study Team Road sector shares about 43%, followed by the railway sector with about 31% in the total project cost for transportation sector. Because land transportation is still dominant for both freight and passenger transport, with more or less 90%, the investment in the transportation sector tend to be allocated to road and railway sector. Total project cost of sea/river transportation sector shares 20% of those in the transportation sector. This is rather high if the present modal share of 8% is taken into account. This seems to reflect government policy to strengthen the relationships between islands in Indonesia. Tables through show the list of candidate projects by sub-sector, namely, road, railway, air transportation and sea/river transportation. Republic of Indonesia March 2010

22 Table (1/2) Candidate Projects for Blue Book for (Road Sector) No. Activity Name Project Cagtegory Project Cost (million US$) Region City/State Category Foreign Counter Total (USD) Part (USD) (USD) I. PROJECT ASSISTANCE RD-P01 Road Rehabilitation Project Nation-wide Nation-wide Upgrading 212, ,540 RD-P02 Provincial-Local Road Improvement Nation-wide Nation-wide Upgrading 212, ,540 RD-P03 Rural Transportation Nation-wide Nation-wide Poverty Rediuction 212, ,540 RD-P04 Bridge Material Nation-wide Nation-wide Upgrading 159, ,405 RD-P05 Regional Road Nation-wide Nation-wide Poverty Rediuction 212, ,540 RD-P06 Solo-Kertosono Toll Road Java East-Java National Backbone 106, ,270 OK RD-P07 Serangan - Tanjung Benoa Toll Road Bali Denpasar Regional Develop. / 159, ,405 Tourism Linkage OK RD-P08 Cileunyi - Sumedang - Dawuan Toll Road Industry Linkage Java West Java National Backbone / 318, ,810 OK RD-P09 Kendari Bridge Sulawesi South East Regional Develop. 63,762 63,762 Sulawesi /Access to Port OK RD-P10 Tayan Bridge Kalimantan /ASEAN Highway Kalimantan West Regional Develop. 95,643 95,643 OK RD-P11 Musi Bridge Sumatra Palembang Urban Transport. / 318, ,810 Bridge construction OK RD-P12 Gorontalo-Djalaludin Airport Access Road Sulawesi Access to Airport Sulawesi Central Regional Develop. / 21,254 21,254 OK RD-P13 Pekanbaru - Kandis - Dumai Freeway Sumatra Riau National Backbone / 318, ,810 Industry Linkage RD-P14 Gilimanuk - Denpasar Freeway Tourism Develop. Bali Bali National Backbone / 132, ,837 Phase-1 & Phase-2, JICA fund Original: Yogja-Solo- Kertosono / PPP China / Korea Loan & Investment / PPP China Loan / PPP scheme China Loan / PPP scheme China Loan / PPP scheme Misi I, II, III bridge together Korea Loan / PPP scheme High priority in JICA PPP Study RD-P15 Trans Sulawesi Maminasata Arterial Road Sulawesi Maminasata Regional Develop. 85,016 85,016 Proposed in JICA M/P RD-P16 Medan-Kualanamu Toll Road Sumatra Medan Urban 140, ,000 Chinese Loan expected / Transportation PPP scheme RD-P17 Bandung Intra Urban Toll Road Java Bandung Urban 318, ,810 JICA Loan expected Kalimantan Balikpapan / Regional Devellp. 85,016 85,016 RD-P18 Pasir Panajam Bridge Construction East Kalimantan / Access to Port RD-P19 Eastern National Road Improvement Program East East Upgrading 177, ,864 Australlian Loan / Candidate for (EINPIP) Indonesia Indonesia RD-P20 Sumatra Indonesia Western National Road Improvement Program (WINRIP) Java / Western Upgrading 80,000 80,000 IBRD Loan RD-P21 Selat Sunda Bridge Java-Sumatra Sunda National Backbone / 531, ,350 Straight ASEAN Highway Expected JICA fund BPN recommended to RD-P22 Batam - Bintan Bridge Industry/tourism include linkage Maluku Ambon Poverty Reduction 42,508 42,508 BPN request activity RD-P23 Galala-Poka Bridge status. Sumatra Batam-Bintan National Backbone / 584, ,485 RD-P24 Papua Strategic Road Development Papua Papua Poverty Reduction 1,786,822 1,786,822 Why budget is so increase? RD-P25 Balikpapan - Samarinda Freeway Kalimantan East Regional Develop./ 531, ,350 Kalimantan ASEAN Highway Important / PPP RD-P26 Kualanamu - Toba Lake Freeway Sumatra North Regional Develop. / 531, ,350 Sumatra Tourism Linkage Important / PPP Korean is interested to RD-P27 Manado Bypass II Sulawesi fund / PPP Scheme Sulawesi North Regional Develop. 17,003 17,003 RD-P28 Bridge Construction in West Nusa Tenggara, East West Nusa Poverty Reduction 195, ,000 BB 2005 / JICA Grant Phase-II Indonesia Tenggara Aid / Candidate for RD-P29 Padan Bypass Capacity Expansion & Duku Sumatra West Regional Develop. / 58,000 58,000 Sumatra Access to Airport Flyover and Port BB 2008 / Korea Fund RD-P30 Additional Loan for Suramadu Bridge Java East Java Regional Develop. / 77,000 77,000 Construction Project Industrial linkage BB 2008 / Chinese Loan RD-P31 Kalimantan Boarder Road Development Project Kalimantan Kalimantan Poverty Reduction 250, ,000 ADB loan RD-P32 South Java Regional Road Development Project Java Java Poverty Reduction 250, ,000 IDB Loan RD-P33 Metropolitan Freeways and Toll Road Project Java DKI Jakarta Urban Transport 213, ,000 JICA loan RD-P34 Eastern Trans Sumatra and Middle Trans Sumatra Sumatra Regional Develop. 200, ,000 Sumatra Project ADB Fund RD-P35 Construction of Keloks 9 brigdes in West Sumatra Sumatra West Sumatra Regional Develop. 39,400 39,400 JICA loan RD-P36 Construction of South Coastal Highway Phase I in Yogjakarta Central Java National Backbone 117, ,989 JICA loan RD-P37 South and Middle Java Corridor Railway Java Central Java Upgrading 81,818 81,818 Corssing Flyover Project JICA loan RD-P38 Asset Management Loan (Road) Project Nation-wide Nation-wide Upgrading 1,000,000 1,000,000 JICA loan RD-P39 Intelligent Traffic System in Jabodedabek Java DKI Jakarta Upgrading 217, ,853 management MOT (DGLT) Java / Semarang, Upgrading 191, ,286 RD-P40 Intelligent Traffic System for Three Cities Sumatra Medan, Surabaya management MOT (DGLT) RD-P41 Tanung Priok Access Road (Phase-3) Java DKI Jakarta National Backbone / 318, ,810 Industrial linkage MOT (DGLT) RD-P42 Road Network in Belawan Port Industrial linkage Sumatra Medan National Backbone / 53,135 53,135 MOT (DGLT) RD-P43 managemet Jakarta Urban Road Network Flyover Java DKI Jakarta Upgrading / 300, ,000 Construction Project RD-P44 Pandan-Malang Toll Road Java East Java Regional Develop. / 184, ,803 Industrial linkage JICA PPP Study RD-P45 Sukabumi - Ciranjang - Padalalan Toll Road Industrial linkage Java West Java National Backbone/ 461, ,079 JICA PPP Study Recommended Agency Line BAPPE Ministr JST NAS y Project Digest Remarks Total 11,665, ,665,910 Source: JICA Study Team Republic of Indonesia March 2010

23 Table (2/2) Candidate Projects for Blue Book for (Road Sector) Project Cagtegory Project Cost (million US$) Recommended Agency Line Project No. Activity Name Region City/State Category Foreign Counter Total BAPPE Remarks Ministr JST Digest (USD) Part (USD) (USD) NAS y II. TECHNICAL ASSISTANCE RD-T01 Tecinical Assistance for Road Preservation Financing Nation-wide Nation-wide Upgrading 3,000 3,000 RD-T02 Bridge Replacement Project for Border Community Development in West Kalimantan Kalimantan West Kalimantan Poverty Reduction 8,750 8,750 JICA Grant RD-T03 Seriously Damaged by Gigantic Earthquake, Sumatra North Poverty Reduction Main Bridges, Urgent Reconstruction Project in Sumatra 15,380 15,380 OK JICA Grant Nias Island North Sumatra Provinces RD-T04 Road Policy Advisor Nation-wide Nation-wide Upgrading 1,000 1,000 OK JICA Expert RD-T05 Asset Management System for Road and Bridge Nation-wide Nation-wide Upgrading 1,000 1,000 OK JICA Grant RD-T06 Construction of Bridge in South East Sulawesi Sulawesi South East Poverty Reduction Province Sulawesi 8,230 8,230 OK JICA Grant RD-T07 Sumatra Arterial Road Network Study Sumatra Sumatra Regional Develop. 3,000 3,000 OK Korea Grant RD-T08 Toll Road Operation PPP Operation Java Java National Backbone 1,000 1,000 OK JICA Grant RD-T09 Bridge Reconstruction, damages by flooding in South Sulawesi Sulawesi South Sulawesi Poverty Reduction 1,000 1,000 OK JICA Grant Bypass Phase-II Sumatra RD-T10 Review of Feasibility Study and DED of Padan Sumatra West Regional Develop. 3,000 3,000 OK KOICA Grant RD-T11 Feasibility Study on Gorontalo - Djalaludin Sulawesi Central Regional Develop./ Airport Sulawesi Access to airport 3,000 3,000 OK KOICA Grant RD-T12 PPTA Regional Road Development Project Kalimantan / Nothern Poverty Reduction Java Kalimantan / South Java 1,300 1,300 OK ADB Grant RD-T13 Study on Arterial Road Network Development Bali / East Bali / East Regional Develop. / Plan with Multimodal Transporation for Bali and Nusa Nusa Access to airport 3,000 3,000 OK JICA Grant Nusa Tenggara Timur Phase-1 Tenggara Tenggara and ferry terminal RD-T14 Private Sector Participation in Road Network Improvement Java DKI Jakarta Urban transportation / Industrial linkage RD-T15 The Project for Bridge Construction of South East Nusa East Nusa Poverty Reduction Ring Road in Nusa Tenggara Timur Phase-I Tenggara Tenngara RD-T16 The Project for Urgent Reconstruction of Main Maluku Maluku Upgrading Bridge in Maluku Tengah Regency in Maluku Province RD-T17 Design Preparation including Detailed Engineering Design for Selected Trans National Nation-wide Nation-wide National Backbone RD-T18 Technical Assistance Service on Improvement of Nation-wide Nation-wide Upgrading Standard Bidding Documents for Road and Bridges in Directorate General of Highways, Ministry of Public Works RD-T19 Papua Arterial Road Network Study Papua Papua Regional Develop. / Mineral resource development linkage RD-T20 Technical Assistance Loan Preparation of Nation-wide Nation-wide Regional Develop. Freewways Program Development RD-T21 Bridge material suppply for Development area in Sumatra Sumatra Upgrading Sumatra 3,000 3,000 OK JICA Grant 13,750 13,750 OK JICA Grant 18,500 18,500 OK JICA Grant 9,300 9,300 OK JICA Grant 2,600 2,600 OK JICA Grant 3,000 3,000 JICA Grant 1,100 1,100 IBRD Grant 10,000 10,000 JICA Grant Total 113, ,910 Total Project Assistance 11,779, ,779,820 Source: JICA Study Team Republic of Indonesia March 2010

24 Table Candidate Projects for Blue Book for (Railway Sector) No. Activity Name Project Cagtegory Project Cost (million US$) Region City/State Category Foreign Counter Total (USD) Part (USD) (USD) I. PROJECT ASSISTANCE RW-P01 Railway to Soekarno Hatta Airport Java Jakarta Urban transportation 120, ,000 Possible for PPP RW-P02 Railway to Juanda Surabaya Airport Java Surabaya Urban transportation 150, ,000 Possible for PPP RW-P03 Double Track Rialway Project in South Sumatra Sumatra S-Sumatra Upgrading 240, ,000 OK RW-P04 Urban Railway Electrification in Bandung Java Bangund Urban transportation 157,000 18, ,000 French interested RW-P05 Urban Railway Electrification in Surabaya Java Surabaya Urban transportation 500, ,000 French interested RW-P06 Jakarta MRT South-North Line Java Jakarta Urban transportation 840, ,000 (Duku Atas -Lubak Bulus) OK Japan interested RW-P07 Jakarta MRT South - North Line Extension Java Jakarta Urban transportation 1,000,000 1,000,000 OK Japan interested (Jakarta Kota - Duku Atas) PW-P08 Manggarai -Cikarang Double-double Track for Java Main Line Java West Java Urban transportation 468, ,000 Recommended Agency Line BAPPE Ministr JST NAS y OK JICA fund, Listed in BB 2006 OK JICA fund RW-P09 Java South Line Double Track Project (Cirebong Java Central Java National Backbone 306,000 54, ,000 - Kroya) (Kroya - Kutoarjo) RW-P10 Java South Line Double Track Project Phase-II Java Central Java National Backbone 226,000 40, ,000 OK JICA fund expected Improvement Project Phase-III (Solo - Surabaya) RW-P11 Java South Line Double Tracking and Signaling Java Central Java National Backbone 609, , ,000 OK JICA fund expected Improvement Porject (Sumarang - Surabaya) RW-P12 Java North Line Double Tracking and Signaling Java Central Java National Backbone 695, , ,000 OK JICA fund expected Improvement Project (Stage 1) RW-P13 JABODETABEK Circular Railway Line Java Jakarta Urban transportation 160, ,000 RW-P14 Improvement of Railway Level Crossing Java / Java / Upgrading for 27,200 4,080 31,280 Protection System in Java and Sumatra (Phase- Sumatra Sumatra Safety RW-P15 Procurement of Locomotive Diesel (30 units) Java/Sumatra Java / Upgrading 129,600 14, ,000 RW-P16 JABODETABEK Bogor Line Capacity Java West Java Upgrading 380,000 70, ,000 Expansion Project maintenance Request to JICA RW-P17 Procurement of Tracks Material and Turnouts Java / Java / Upgrading quality 102,000 15, ,300 Listed in BB2006 RW-P18 Development of Regional Railway System of Java Central Java Regional Develop. 200,000 50, ,000 Central Java Region (Phase-1) F/S done by JICA Listed in BB2006, Mainteance Machinery (Phase-II) maintenance Requested to KfW RW-P19 Procurement of Railway Track Construction and Java Java Upgrading 65,000 9,750 74,750 RW-P20 Procurement of 24 Unit (3set) Electric Railcars Java DKI Jakarta Upgrading service 37, ,000 Requested JICA grant RW-P21 Procurement of 160 Unit Electric Rail Car for Java DKI Jakarta Upgrading service 207, ,000 JABODETABEK RW-P22 Railway Bridge Rehabilitation in West Sumatra Sumatra West Upgrading for 80,000 80,000 RW-P23 Jakarta MRT East-West Line Java DKI Jakarta Urban transportation 1,100,000 1,100,000 Pre-F/S done by JICA RW-P24 Central Station Development in Dukhu Atas Java DKI Jakarta Urban transportation 80,765 80,765 DGLT Project Project Digest Remarks Total 7,879, ,530 8,384,095 II. TECHNICAL ASSISTANCE RW-T01 Jakarta MRT South-North Line Extension and East-West Line Enineering Services Java DKI Jakarta Urban transportation 20,000 3,000 23,000 OK Pre-F/S done by JICA (Urban Railway LRT Study) RW-T02 Construction of Ache Railway Line Phase-1 Sumatra Ache Regional Develop. 10,000 1,000 11,000 China fund comitted RW-T03 In-house Consultant for Indonesian Railway Nation-wide Nation-wide Upgrading Development technology 8,000 2,000 10,000 OK RW-T04 Trans Sumatra Railway : Engineering Service Sumatra Sumatra National Backbone 2, ,300 OK F/S done by SNCF RW-T05 Underpass / Flyover on Java Railway Main Line Java Java Upgrading safety (Engineering Services) 12,000 2,000 14,000 OK Pre-F/S done by 3, ,500 OK JETRO RW-T06 The Feasibility Study for Java High Speed Train Java Java National Backbone RW-T07 National Railway Master Plan Study Java/Sumatra Java/Sumatra Master Plan 5,000 1,000 6,000 OK Finance by AusAID RW-T08 Study on JABODETABEK Railway Java DKI Jakarta Management Management Reform and Service Improvement Reform 12,000 2,000 14,000 OK Expected JICA loan 1, ,635 Java South Line OK (IP-518) RW-T09 Rreliminary Existing Railway Bridge Survey on Java Central Java Upgrading safety RW-T10 In-house Consultant for Double-Double Track Project Java DKI Jakarta technology Upgrading RW-T11 Improvement of The Railway System in the East Java DKI Jakarta Urban transportation Jakarta Industrial Region / Industrial linkage 2,500 1,000 3,500 OK Possiblity of PPP Total 76,987 12,989 89,975 Total Project Assistance 7,956, ,519 8,474,071 Source: JICA Study Team Republic of Indonesia March 2010

25 Table Candidate Projects for Blue Book for (Air Transport Sector) Project Cagtegory Project Cost (,000) No. Activity Name Region City / State Category Foreign Counter Total (USD) Part (USD) (USD) I. PROJECT ASSISTANCE AR- P01 New CNS/ATM System Development for Indonesia Nation-wide Nation-wide New System Development 194,000 19, ,400 AR- Procurement of Landing Facility Nation-wide Nation-wide Upgrading 22,500 2,500 25,000 P02 AR- P03 AR- P04 AR- P05 AR- P06 AR- P07 AR- P08 AR- P09 AR- P10 Enhancement of Safety for Air link to Eastern Indonesia Airport Development for Disaster Measure and Border Region Development Development of Airport in Papua Papua Wamena, Sorong, Manokwari, Jayapura, Merauke Procurement and Installation of Security Equipment Implementation of Indonesia National Aeronautical Information System Centre (NASC) Phase II Nusa Tenggara, Maluku, Upgrading 42,000 8,000 50,000 Nation-wide Nation-wide Poverty Reduction 140,000 18, ,200 Poverty Reduction 196,040 84, ,057 Nation-wide Nation-wide Upgrading 14,337 14,337 Nation-wide Nation-wide Upgrading 7,200 7,200 Procurement of Airport Rescue and Fire Fighting Nation-wide Nation-wide Upgrading 28,700 3,000 31,700 Equipment Procurement of aircraft for Pioneer Flight Multiple Airport Development for Jakarta Metropolitan Area Nation-wide, maily Nusa Tenggara, Maluku Support Remote area 480, ,000 Recommended Agency Line BAPP Ministry ENAS OK F/S done by JICA Continue to request OK from Blue book list.jbic SAPROF done. OK French interested OK OK OK OK OK Java Jakarta National Backbone 500, ,000 JST Project Digest Remarks Continue to request from Blue book list. Continue to request from Blue book list. Ministry consider to budget allocation to APBN. Requested in Blue book list. Requested in Blue book list. Total 1,624, ,117 1,759,894 II. TECHNICAL ASSISTANCE AP- Restructuring and Regulatory Reform for Civil Nation-wide Nation-wide Management reform T01 Aviation Authority Technical Assistance OK USTDA interested AP- Project for Improvement Aviation Safety Policy Nation-wide Nation-wide Upgrading safety 3,300 3,300 JICA interested and T02 OK Implementation project is on process. AP- The Master Plan Study on the Multiple-Airport Java Jakarta National Backbone 2,000 2,000 JICA interested and T03 Development for Jakarta Metropolitan Area OK Implementation project is on process. AP- Enhancement of Inspector Competencies in Nation-wide Nation-wide Upgrading safety 5,000 5,000 OK AP- Air Navigation Blue Print Development Nation-wide Nation-wide Upgrading T05 technology OK Australia interested AP- Project for Introduction of Environmental Nation-wide Nation-wide Upgrading quality 2,400 2,400 Continue to request T06 Friendly Airport (Eco-Airport) OK from Blue book list. Total 13, ,441 Total Project Assistance 1,638, ,117 1,773,335 Source: JICA Study Team Republic of Indonesia March 2010

26 Table Candidate Projects for Blue Book for (Sea/River Transport Sector) Project Cagtegory Project Cost (,000) Recommended Agency No. Activity Name Region City / State Category Foreign Counter Total Line BAPP (USD) Part (USD) (USD) Ministry ENAS JST I. PROJECT ASSISTANCE SE- Improvement and Development of Indonesia Nation-wide Nation-wide Upgrading safety 22,800 8,400 31,200 P01 Aids to Navigation SE- Indonesian Ship Reporting System Nation-wide Nation-wide Upgrading 17,504 2,891 20,395 P02 management SE- Procurement of Special Vessel for Navigation Nation-wide Nation-wide Upgrading safety 107,317 5, ,290 P03 Aids and operation SE- Development of Jayapura Port Facilities Papua Papua Regional Develop. 14,790 2,610 17,400 SE- Vessel Traffic Services System Nation-wide Nation-wide Upgrading safety 60,853 6,788 67,641 SE- Indonesia Coast Guard Patrol Boats Retrofit Sumatra Malacca St. Upgrading safety 39,780 7,020 46,800 SE- Procurement of Patrol Boat to Enhance Maritime Sumatra Malacca St. Upgrading safety 120, ,000 P07 Safety (Class II) SE- P08 Public Ship Finance for Development of Domestic Ship Industry (Phase I) SE- Procurement of Passenger Vessel and Pioneer P09 SE- Ship Development of Strategic and Local Ports (some P10 port will be selected among 29 listed ports) SE- P11 SE- P12 SE- P13 Improvement of River Transportation (Musi River, Ciliwung River, Kapuas River, Barito River, Mambano River) Development of Ferry Port (Surabaya- Banjarmasin, Samarinda-Parepare, Banka Belitung-Pontianak, Banjarmasin, Papua) Development of International Hub Port in Greater Jakarta Metropolitan Nation-wide Nation-wide Upgrading technology / management 300, ,000 Nation-wide Nation-wide Poverty Reduction 1,089,267 N/A 1,089,267 Nation-wide Main City Regional Develop. 1,588,735 N/A 1,588,735 Sumatra / Kalimantan Sumatra / Kalimantan Regional Develop. 170,032 N/A 170,032 Java / Sumatra / Kalimantan / Main City Regional Develop. 239,107 N/A 239,107 Java DKI Jakarta National Backbone/ 800, ,000 1,000,000 Domestic Hub Port Project Digest Remarks SE- P14 Development of Batam Port Sumatra Batam National Backbone / International Hub 300,000 N/A 300,000 SE-P1 Development of Dumai Port (III) Sumatra Riau Development / 300,000 N/A 300,000 Upgrading Total 5,170, ,682 5,403,867 II. TECHNICAL ASSISTANCE SE- Master Plan for Strategic Development of Ports Sumatra West Regional Develop. 7, ,000 T01 at West Coast of Sumatra Sumatra SE- Standardization for Development of Nation-wide Nation-wide Upgrading quality 7, ,000 T02 Environment Protective System in Ports in SE- Development Study on Upgrading Sea Trade in Java DKI Jakarta 7, ,000 T03 Greater Jakarta Metropolitan SE- T04 Study on Urgent Improvement of Surabaya Metropolitan Port 7, ,000 SE- Master Plan for Indonesian Port 5, ,313 SE- Master Plan for Ferry Port Network 5, ,313 Total 38, ,627 Total Project Assistance 5,208, ,682 5,442,494 Source: JICA Study Team Republic of Indonesia March 2010

27 Figure shows the regional distribution of candidate projects. Candidate Projects: Regional Distribution Road projects well balanced in the region. In Java, the railway sector investment is remarkable, but the modal share is only 7.3% for passenger transportation. Major part of Road investment in Java depends on BOT schemes and reduced national budget portion. In Jakarta, the MRT project and New International Hub Port Development are focused, which could be National Backbone Projects. Allocation to East Indonesia is high compared with the population (6% ) and the GRDP (3%), which reflected presidential instruction to Papua investment. Nation-wide Projects mainly upgrading safety, management and technology aspects are focused in Sea, Air and Road Transportation Sectors. Source: Information from line ministries and compiled by JICA Study Team Figure Candidate Projects of Transportation Sector for Blue Book by Region For the road sector, project distribution is well balanced in the whole of Indonesia. The allocation to Sumatra is the highest, which is targeting to support industrial development by establishing direct linkage between the production areas and the port/airport, for strengthening the logistics. The remarkable allocation to East Indonesia, particularly to Papua is proposed by BAPPENAS in accordance with the presidential instruction for Papua development. Prior to the intensive investment for road networks however, the integrated regional development plan for the Papua Region should be formulated for effective and efficient infrastructure development. In DKI Jakarta and Java, railway investment is remarkable. Modal shift to public transportation will be accelerated in the next five years with the construction of the Mass Rapid Transit (MRT) network, airport access railway, modernization and improvement of JABODETABEK Railway, and monorail system in addition to the existing BRT system in DKI Jakarta. Said modal shift will not be limited in DKI Jakarta but will be extended to Surabaya, Bandung and Semarang in the future. Transportation investment for Java is also the same as the characteristics of DKI Jakarta, considering that the railway sector investment is higher than that of the road investment. The main reason is that huge investment for double tracking and electrification projects for the Java South and North lines Republic of Indonesia March 2010

28 continues to strengthen the railway capacity in the whole of Java Island. Another factor is that Trans-Java Highway Corridor mainly is expected for implementation under the BOT scheme, and that most of the project cost depends on private investment, which is not included in the figure above. On the other hand, the toll road projects under BOT schemes are generally not progressing well and seriously delayed for implementation mainly due to difficulties in land acquisition and financial arrangement. GOI is currently reviewing the BOT scheme of the toll road including further participation of the government in terms of land acquisition and financial assistance, to change from BOT to Public Private Partnership (PPP) scheme. Apart from the fact that road investment in Indonesia is highly dependent on private investors, government investment on the railway sector is still remarkable in Java. This is highly related to the future vision of the Java Regional Development, that Java could be developed with more high-tech industries, finance, business and commercial center similar to Megalopolis. The Megalopolis is a region with two or more mega cities interconnected together, forming one big urban area, such as BOSWOSH (Boston (5.9 million) Hartford (1.2 million) New York (18.8 million) Philadelphia (5.6 million) Baltimore(2.5 million) Washington D.C (4.8 million), Taiheiyo Belt Megalopolis of Japan. The Java Megalopolis could be realized by strong corridors of highway and high speed rail along Jakarta Bekasi Karawang Cirebon Semarang Surabaya and forming a big urban area, which was nominated as one of the candidate projects for the next blue book as technical assistance project. The candidate projects of the transportation sector are also categorized according to project objectives. In this chapter, the project objectives are classified into five categories, which are highly related to the three focus areas, namely, i) building strong backbone infrastructure, ii) upgrading infrastructures in the main cities, and iii) provision of basic infrastructure services in the depressed areas. Three Focus Areas in the Next RPJM Objectives of The Candidate Projects Building Strong Backbone Infrastructure Upgrading Infrastructure Quality Building Strong Backbone Infrastructure Upgrading Infrastructure in Main Cities Integrated Urban Development in Main Cities Provision of Basic Infrastructure Services in Depressed Areas Integrated Regional Development Support Remote Area for Provision of Infrastructures Source: JICA Study Team Figure Relationship between the Three Focus Areas and Project Objectives Republic of Indonesia March 2010

29 The project objectives are well balanced to reflect the policy in RPJM Strengthen national backbone are to be realized by road, rail and sea transportation infrastructures Java and Sumatra Backbone Infrastructure Development Urban railway is focused for the future transportation measures in Indonesia. Modal shift from Road to MRT in major cities such as Jakarta, Surabaya, and Bandung are promoted. Regional Growth Pole development to be conducted by Port and Access Road Development. Dumai, Belawan, Makassar, Surabaya,and other major ports. High consideration on Government Support to Remote Areas, by Road, Air and Sea Transportation Sectors. Source: Information from line ministries and compiled by JICA Study Team Figure Candidate Projects of Transportation Sector for Blue Book by Objective For upgrading the existing infrastructures, service capacity, safety aspects, service quality, and so on, constant investment is essential. Around 20% of the budget would be allocated for the maintenance and upgrading of the existing infrastructures. Particularly, high share of road sector is observed, as the current service quality of existing infrastructure is rather poor. For infrastructure to strengthen national backbone, road, rail and port development are mainly proposed. For the road network development, trans-java and Sumatra Highway, double tracking and signaling of Java South Line, the new port development at Jakarta and Batam are included as components. In view of the national development corridor and the future participation to global economic corridor, the nominated projects for building strong national backbone development would be reasonable. For the improvement of urban transportation condition, rail-based MRT system projects are the major components. In addition, improvement of road network such as flyover construction, ring-road development and intra-urban highway development are necessary and hence, nominated as candidate projects. For regional growth poles development in each region, port development and access road network projects are mainly proposed, as pointed out in Sub section of this report. Republic of Indonesia March 2010

30 High consideration of government support to remote area development is made in the proposed candidate list. Particularly, project formulation in Papua and the accumulated high share of around 20% is vital for the road, port and airport sectors. (2) Setting Evaluation Criteria The collected project information was well-assessed by the JICA Study Team and evaluated for suitability of those nominated in the Blue Book, based on the following evaluation criteria: Consistency with the national development policy and strategy of RPJM Suitability of regional and sector development policy and strategy, Economic viability of the candidate projects Urgency of the Project, Possibility of project implementation Appropriateness for international cooperation Among the above evaluation criteria, the first criteria, Consistency with the national development policy and strategy described in RPJM is the most important and candidate projects should be pre-evaluated in this aspect prior to performing the detailed assessment. In case the nominated projects are not in compliance with the RPJM , said project should not be included in the Blue Book. (3) First Evaluation: Consistency with the National Development Plan All the candidate projects were initially assessed based on the development policy and strategies on transportation sector under RPJM The transportation development strategies and direction of development policy are as follows: Table Strategy and Development Policy of Transportation Sector in RPJM No. Strategy Direction of Development Policy 1 Improvement of the facility and infrastructure standards comply with minimum services standards Reducing the maintenance backlog of transportation infrastructure and facilities 2 Improving the condition of road infrastructure services in accordance with minimum service standards 3 Improving safety and quality of transport services 4 Enhance the professionalism of transportation human resources 5 Support the development of sustainable transportation in the context of mitigation and adaptation to climate change 6 Improvement of urban public transport management 7 Increasing the capacity and speed of the early acts of search and rescue victims of accidents and disasters 2 Support the improvement of real sector competitiveness 8 Improve the quality and capacity of transport services to support the smooth distribution of goods and services and to support the development of tourism areas and centers of agricultural and industrial Republic of Indonesia March 2010

31 production 9 Encouraging efficient transportation of goods and passengers 10 Improve transport services strategy more competitive in between-mode and among-mode 11 Improve fluency, capacity and service quality in the cross and corridors that have been saturated and the continuity of the severed land transportation in the island (rivers and lakes) and inter-island with a point-to-point services 12 Developing public transport in urban mass affordable and efficient rail-based in the metropolitan area 13 Technological developments and meet the international conditions 3 Improve the Government and Private Partnership 14 Encourage private sector s role in the transportation sector through institutional reforms and legislation that enables the provision of infrastructure 15 Encourage cooperation and capacity building of central and local governments in planning, preparing and conducting transactions of KPS projects 16 Bundling and unbundling KPS transportation projects and provide support and feasibility facilities for more interesting projects for the private sector Among the above three strategies of the transportation sector, Improve the Government and Private Partnership is focused on institutional and capacity development aspects of the government administration as well as legal set-up matters. The three development strategy sub-items 14 to 16 above are not directly related to the candidate projects. Therefore, the development policies under this strategy are not considered as the criteria for evaluation of the candidate projects, whether or not the candidate project complies with the national development policy and strategy mentioned in RPJM The evaluation results are compiled in the following tables: Republic of Indonesia March 2010

32 Table Evaluation Results for Compliance to National Development Strategies for Transportation Sector in RPJM (Road Sector) Road Sector RD- P01 RD- P02 RD- P03 RD- P04 RD- P05 RD- P06 RD- P07 RD- P08 RD- P09 RD- P10 RD- P11 RD- P12 RD- P13 RD- P14 RD- P15 RD- P16 RD- P17 RD- P18 RD- P19 RD- P20 RD- P21 RD- P22 RD- P23 RD- P24 RD- P25 RD- P26 RD- P27 RD- P28 RD- P29 RD- P30 RD- P31 RD- P32 RD- P33 RD- P34 RD- P35 RD- P36 RD- P37 RD- P38 RD- P39 RD- P40 RD- P41 RD- P42 RD- P43 PD- P44 RD- P45 Road Rehabilitation Project Provincial-Local Road Improvement Rural Transportation Bridge Material Regional Road Solo-Kertosono Toll Road Serangan - Tanjung Benoa Toll Road Cileunyi - Sumedang Dawuan Toll Road Kendari Bridge Tayan Bridge Musi Bridge Gorontalo-Djalaludin Airport Access Road Pekanbaru - Kandis Dumai Freeway Gilimanuk - Denpasar Freeway Trans Sulawesi Maminasata Arterial Road Medan-Kualamanu Toll Road Bandung Intra Urban Toll Road Pasir Panajam Bridge Construction Eastern National Road Improvement Program (EINPIP) Western National Road Improvement Program (WINRIP) Selat Sunda Bridge Batam-Bintan Bridge alala-poka Bridge Papua Strategic Road Development Balikpapan - Samarinda Freeway Kualamanu - Toba Lake Freeway Manado Bypass II Bridge Construction in West Nusa Tenggara, Phase-II Padan Bypass Capacity Expansion Additional Loan for Suramadu Bridge Construction Project Kalimantan Boarder Road Development Project South Java Regional Road Development Project Metropolitan Freeways and Toll Road Project Eastern Trans Sumatra and Middle Trans Sumatra Project Construction of Keloks 9 bridges in West Sumatra Construction of South Coastal Highway Phase-I in Yogyakarta South and Middle Java Corridor Railway Crossing Flyover Project Asset Management Loan (Road) Project Intelligent Traffic System in Jabodedabek Intelligent Traffic System for Three Cities Tanung Priok Access Road (Phase-3) Road Network in Belawan Port Jakarta Urban Road Network Flyover Construction Project Pandan - Malang Toll Road Sukabumi - Ciranjang - Padalarang Toll Road 1 Improvement th efacilities and infrastructure standard comply with minimum services standard Reducing the backlog of maintenance and 1 transportation infrastructure Improving the condition of road infrastructure services in accordance with minimum service standards 3Improving safety and quality of transport Enhance the professionalism of transportation human resources Support the development of sustainable transportation in the context of mitigation and adaptation to climate change Improvement of urban public transport management Increasing the capacity and speed of the early acts of search and rescue victims of accidents and disasters 2 Support the improvement of real sector competitiveness improve the quality of fan capacity transport services to support the smooth distribution of goods and services and to support the development of tourism areas and centers of agricultural and industrial production Encouraging efficient transportation of goods and passengers improve transport services strategy more competitive in between-mode and among- Improve fluency, capacity and service quality in the cross and corridors that have been saturated and the continuity of the severed land transportation in the island (rivers and lakes) and inter-island with a point-to-point Developing public transport in urban mass affordable and efficient rail-based in the metropolitan area Technological developments and meet the international conditions Score of Second Evaluation Remarks: Fully matched with the Development Partially matched with the Development Policy not pached with the development policy -- : not related to the development policy Republic of Indonesia March 2010

33 Table Evaluation Results for Compliance to National Development Strategies for Transportation Sector in RPJM (Railway, Air Transport, Sea/River Transport Sectors) Railway Sector Air Aviation Sector Sea/River Sector RW- P01 RW- P02 RW- P03 RW- P04 RW- P0 RW- P06 RW- P07 RW- P08 RW- P09 RW- P10 RW- P11 RW- P12 RW- P13 RW- P14 RW- P15 RW- P16 RW- P17 RW- P18 RW- P19 RW- P20 RW- P21 RW- P22 RW- P23 RW- P24 AR- P01 AR- P02 AR- P03 AR- P04 AR- P05 AR- P06 AR- P07 AR- P08 AR- P09 AR- P10 SE- P01 SE- P02 SE- P03 SE- P04 SE- P05 SE- P06 SE- P07 SE- P08 SE- P09 SE- P10 SE- P11 SE- P12 SE- P13 SE- P14 SE- P15 Railway to Soekarno Hatta Airport Railway to Juanda Surabaya Airport Double Track Railway Project in South Sumatra Urban Railway Electrification in Bandung Jurban Railway Electrification in Surabaya JKT MRT South-North Line (Lebakbulus - Duku Atas) Jakarta MRT South - North Line Extension (Jakarta Kota - Duku Atas) Manggarai - Cikarang Double -double Track for Java Main Line Java South Line Double Track Project (Cirebon - Kroya) Java South Line Double Track Project Phase-II (Kroya Java South - Kutoarjo) Line Double Tracking and Signaling Improvement Project Phase III (Solo-Surabvaya) Java North Line Double Tracking and Signaling Improvement Project (Semarang - Surabvaya) JABODETABEK Circular Railway Line Imrpvement Project (Stage-I) Improvement of Railway Level Crossing Protection System in Java and Sumatra (Ph- II) Procurement of Locomotive Diesel (30 Units) JABODETABEK Bogor Line Capacity Expansion Project Procurement of Tracks Material and Turnouts Deelopment of Regional Railway System of Central Java Region (Phase-1) Procurement of Railway Track Construction and Maintenance Machinery (Phase-II) Procurement of 24 Unit (3set) Electric Railcars Procurement of 160 Unit Electric Railcars for JABODETABEK Bridge Improvement of West Sumatra Jakarta MRT East-West Line Central Station Development in Dukuh Atas New CNS/ATM System Development for Indonesia Procurement/ Replacement of Landing Facilities Opening up Eastern Indonesia by Enhancing the safety for Air links Airport Development for Disaster Measure and Border Region Development of Airport in Papua Procurement and Installation of Security Equipment Restructuring and Regulatory Reform for Civil Aviation Authority Technical Project for Improvement Aviation Safety Policy The Master Plan Study on the Multiple- Airport Development for Jakarta Multiple airport development for Jakarta Metropolitan Area Improvement and Development of Indonesia Aids to Navigation Indonesian Ship Reporting System Procurement of Special Vessel for Navigation Aids Development of Jayapura Port Facilities Vessel Traffic Services System Indonesia Coast Guard Patrol Boats Retrofit Project Procurement of Patrol Boat to Enhance Maritime Safety (Class II) Public Ship Finance for Development of Domestic Ship Industry (Phase I) Procurement of Passenger Vessel and Pioneer Ship Development of Strategic and Local Ports Improvement of River Transportation (Musi River, Ciliwung River, Kapuas Development of Ferry Port (Surabaya- Banjarmasin, Samarinda-Parepare, Development of International Hub Port in Greater Jakarta Metropolitan Development of Batam Port Development of Dumai Port 1 Improvement th efacilities and infrastructure standard comply with minimum services standard Reducing the backlog of maintenance and transportation infrastructure Improving the condition of road infrastructure services in accordance with minimum service standards Improving safety and quality of transport Enhance the professionalism of transportation human resources Support the development of sustainable transportation in the context of mitigation and adaptation to climate change Improvement of urban public transport management Increasing the capacity and speed of the early acts of search and rescue victims of accidents and disasters 2 Support the improvement of real sector competitiveness improve the quality of fan capacity transport services to support the smooth distribution of goods and services and to support the development of tourism areas and centers of agricultural and industrial production Encouraging efficient transportation of goods and passengers improve transport services strategy more competitive in between-mode and among- Improve fluency, capacity and service quality in the cross and corridors that have been saturated and the continuity of the severed land transportation in the island (rivers and lakes) and inter-island with a point-to-point Developing public transport in urban mass affordable and efficient rail-based in the metropolitan area Technological developments and meet the international conditions Score of Second Evaluation Remarks: Fully matched with the Development Partially matched with the Development Policy not pached with the development policy -- : not related to the development policy Republic of Indonesia March 2010

34 (4) Second Evaluation: Scoring and Characteristics of Candidate Projects After the preliminary evaluation of the candidate projects, whether it complies with the national development policy and strategy or not, the detailed assessment of the candidate projects was conducted. The assessment was made on five viewpoints mentioned in (2) above. These are 1) compliance to regional and sector development policy and strategies, 2) economic viability, 3) urgency of the project, 4) implementability, and 5) appropriateness for international cooperation. The detailed items of evaluation, evaluation weight and scoring criteria presented as category are summarized in Table For the detailed evaluation, five major categories are defined taking into account the appropriateness of the candidate projects for inclusion in the Blue Book. These categories are similar to the five viewpoints stated above. The evaluation weight is compared for each category and determined by JICA Study team, as follows: Table Selected Category and Evaluation Weight No. Category Weight Remarks 1 Compliance to regional and sector development policy 27% Considered as the most important criterion being the ultimate goal of the project to attain the objectives of RPJM. 2 Economic viability 25% The national target of GDP growth for the next five years is 6-7%. The projects with high EIRR shall be prioritized for effective economic growth. 3 Urgency of the project 5% This criterion is set rather low as the urgency of the projects is already considered in the economic viability. 4 Implementability of the Project 20% Implementability of the project is very important to avoid the implementation delays, which might seriously affect the sustainable economic growth in the country. 5 Appropriateness for international cooperation 23% Those projects which need foreign assistance such as those involving high technologies and transfer of technology, also considers foreign investment as essential for the implementation. In accordance with the evaluation criteria set in the previous section, all the transportation projects were evaluated by JICA Study Team. The result is compiled in Table and shown visually in Figure Republic of Indonesia March 2010

35 Republic of Indonesia March 2010 Table Evaluation Items, Weight and Scoring Criteria for the Project Evaluation for Transportation Sector Point No. Category Evaluation Items Weight Material % RPJM Not specified in the RPJM Opposite concept against Fully Match with the Between 1 and 3 but considered as the Between 3 and 5 (Book 3) RPJM General Concept same concept Fitness of Regional and Sector Development Policy and Strategy Economic Viability Urgency of the Project Implementability 20% Appropriateness for International Cooperation 27% 25% 5% 23% Note: 1 Regional Development Plan Sector Development 2 Plan Sub-Total 12% RENSTRA Opposite concept against RENSTRA Between 1 and 3 Not specified in the RENSTRA but considered as the same concept. Between 3 and 5 Fully Match with the General Concept of RENSTRA 10%-15% 0% - 10% 15%-20% More than 20% Negative New Project in urban area 1 Indicative EIRR (*1) 7% Views by JST New project in semi-urban Rehabilitation / extension Direct linkage with New New project in remote area Rehabilitation / extension area Project in urban area Industrial projects project in semi-urban area 2 Number of 3% Views by JST Less than 100, ,000-1,000,000 Around 1 million 1-10 million More than 10 million Benefit on Low 3 Income People Synergetic Effect with 4 other sectors Sub-Total Present Demand - 1 Supply Balance Sub Total Number of PAP / 1 Social Impact 5% Views by JST Less benefit for low income people Target beneficially is not specified by Income level 10% Views by JST Not exppected Between 1 and 3 5% Views by JST 7% Views by JST 2 Difficulty of EIA 3% Views by JST Capacity of Executing 3 Agency 3% Views by JST 4 Maturity of the Project 7% Views by JST Sub Total 1 Technical Difficulty 15% Views by JST Possibility on Private 2 Finance Accessibility by 3 Foreign Experts 5% Views by JST 3% Views by JST Target beneficially is to Main beneficially is low middle - low income people income level. Expected but so far difficult Between 3 and 5 to be list up and not sure. The difficit is not very Needed within 5-10 years, The difficit is not very serious and some and the issue is very serious within the 10 years. alternative is considerable. serious for the people PAP is more than 1,000 and opposition by local government is expected. The project area is located in natural reserve / sensitive area, and Negative Impact will be Executing agency is premitive and not willing to take responsibility for implementation. M/P should be formulated before F/S. No high technology / management capability is required. No chance for Private investment and all the construction, O&M cost to be paid by government Should be done by local expert due to cultural / social difficulties. PAP is more than 1,000 and opposition by local people / NGO is expected. (LG: positive) EIA is not carried out and the project area is expected within reserve/sensitive area. The agency is newly established and no experiences but strong will for implementation and responsibility F/S will be needed to implement the project. between 1 and 3 Between 1 and 3 Foreign experts are not welcome as the site is not safe for public peace. Needed within 3-5 years, and the issue is very serisous for the people PAP is 100-1,000. PAP is 100-1,000 LG:Positive, but opposition LG: Positive, PAP/NGO: by PAP/NGO is expected. not strongly opposed. EIA is not carried out but no signifinant negative effect is expected. Enough experiences. But not strong will for the implementation with responsibility F/S ready but no EIA / RAP. Possible to implement locally, but better to introduce foreign technology in the view of Basically Government Investment is suitable, but possible for franchaise contract for O&M. No problem to participate by foreing expert but JV with locall entity is essential because of language and cultural issues. EIA on-going / completed Similar experiences but the first experiences to tackle the Project. Strong will for the implementation. F/S and EIA ready but look for finance between 3 and 5 Suitable PPP scheme, with around 50% investment from government, with risk sharing. No problem to participate by foreing expert in the view of safety, political & social aspects. Target beneficially is to low income people Higly expected to stimulate other sector development Urgently needed within 3 years, and the issue is very serious for the people. PAP is less than 100 Sub Total 100% (*1): For the project for establishment of safety management system, EIRR is not suitable to estimate, and JST tentatively judged as point "5" in this category. EIA completed / approved Well experienced to implement the similar projects, and strong will for the implementation. F/S, EIA, Finance Ready High Technologies / management Knowhow from the developed coutries are essential to High FIRR is expected by by private investment, with minor government Investment. Positive to participate by foreign expert, in the view of safety, political & social aspects.also Transfer of technology is highly expetected. Final Report Chapter 4

36 Republic of Indonesia March 2010 No. Activity Name Table Evaluation Results of Candidate Transportation Projects for Inclusion in Blue Book Project Cagtegory Project Region Category Cost ('000US U D) S Recommended Agency Project Evaluation I. PROJECT ASSISTANCE 1 RW-P06 Jakarta MRT South-North Line Java Urban transportation 840, A 2 RD-P08 Cileunyi - Sumedang - Dawuan Toll Road Java National Backbone 318, A 3 RD-P41 Tanung Priok Access Road (Phase-3) Java National Backbone 318, A 4 RW-P23 Jakarta MRT East-West Line Java Urban transportation 1,100, A 5 RD-P30 Additional Loan for Suramadu Bridge Java Regional Develop. 77, A 6 RD-P15 Trans Sulawesi Maminasata Arterial Road Sulawesi Regional Develop. 85, A 7 RW-P07 Jakarta MRT South - North Line Extension Java Urban transportation 1,000, A 8 RW-P05 Urban Railway Electrification in Surabaya Java Urban transportation 500, A 9 SE-P13 International Hub Port in Greater Jakarta Java National Backbone 1,000, A 10 AR-P01 New CNS/ATM System Nation-wide Upgrading 213, A 11 SE-P08 Public Ship Finance for Domestic Ship Industry Nation-wide Upgrading 300, A 12 RD-P43 Jakarta Urban Road Network Flyover Java Upgrading 300, A 13 AR-P06 Procurement / Installation of Security Equipment Nation-wide Upgrading 14, A 14 AR-P10 Multiple Airport for Jakarta Metropolitan Area Java National Backbone 500, A 15 RW-P16 JABODETABEK Bogor Line Capacity Java Upgrading 450, A 16 RD-P16 Medan-Kualanamu Toll Road Sumatra Urban Transportation 140, A 17 RD-P22 Batam - Bintan Bridge Sumatra National Backbone 584, A 18 RD-P44 Pandan-Malang Toll Road Java Regional Develop. 184, A 19 RD-P06 Solo-Kertosono Toll Road Java National Backbone 106, A 20 RW-P01 Railway to Soekarno Hatta Airport Java Urban transportation 120, A 21 PW-P08 Manggarai -Cikarang Double-double Track Java Urban transportation 468, A 22 RW-P13 JABODETABEK Circular Rail Line Java Urban transportation 160, A 23 RW-P04 Urban Railway Electrification in Bandung Java Urban transportation 175, A 24 RD-P13 Pekanbaru - Kandis - Dumai Freeway Sumatra National Backbone 318, A 25 RD-P17 Bandung Intra Urban Toll Road Java Urban Transportation 318, A 26 RW-P09 Java South Line D-Track (Cirebong - Kroya) Java National Backbone 360, A 27 RW-P24 Central Station Development in Dukhu Atas Java Urban transportation 80, A 28 RW-P10 Java South Line D-Track (Kroya - Kutoarjo) Java National Backbone 266, A 29 AR-P04 Airport for Disaster Measure and Border Region Nation-wide Poverty Reduction 158, A 30 RD-P38 Asset Management Loan (Road) Project Nation-wide Upgrading 1,000, A 31 SE-P10 Strategic and Local Ports Project (29 listed Nation-wide Regional Develop. 1,588, A 32 AR-P05 Development of Airport in Papua Poverty Reduction 280, B 33 SE-P02 Indonesian Ship Reporting System Nation-wide Upgrading 20, B 34 SE-P05 Vessel Traffic Services System Nation-wide Upgrading safety 67, B 35 RD-P39 Intelligent Traffic System in Jabodedabek Java Upgrading 217, B 36 SE-P04 Development of Jayapura Port Facilities Papua Regional Develop. 17, B 37 RW-P20 Procurement of 24 Unit (3set) Electric Railcars Java Upgrading service 37, B 38 RW-P21 Procurement of 160 Unit Electric Rail Car Java Upgrading service 207, B 39 RD-P45 Sukabumi - Ciranjang - Padalalan Toll Road Java National Backbone 461, B 40 RD-P10 Tayan Bridge Kalimantan Regional Develop. 95, B 41 RD-P29 Padan Bypass Capacity Expansion & Duku Sumatra Regional Develop 58, B 42 RD-P27 Manado Bypass II Sulawesi Regional Develop. 17, B 43 SE-P1 Development of Dumai Port (III) Sumatra Upgrading 300, B 44 SE-P11 Improvement of River Transportation Suma / Kali Regional Develop. 170, B 45 SE-P12 Development of Ferry Port Nationwide Regional Develop. 239, B 46 RD-P34 Eastern and Middle Trans Sumatra Project Sumatra Regional Develop. 200, B 47 RD-P05 Regional Road Nation-wide Poverty Rediuction 212, B 48 RW-P19 Track Construction and Mainteance Machinery Java Upgrading 74, B 49 RD-P21 Selat Sunda Bridge Java-Sumatra National Backbone 531, B 50 RD-P18 Pasir Panajam Bridge Construction Kalimantan Regional Devellp. 85, B 51 RW-P15 Procurement of Locomotive Diesel (30 units) Java/Sumatra Upgrading 144, B 52 AR-P03 Safety for Air link to Eastern Indonesia East Upgrading 50, B 53 RW-P18 Regional Railway System of Central Java Region Java Regional Develop. 250, B 54 SE-P01 Development of Indonesia Aids to Navigation Nation-wide Upgrading safety 31, B 55 SE-P09 Passenger Vessel and Pioneer Ship Nation-wide Poverty Reduction 1,089, B 56 RD-P11 Musi Bridge Sumatra Urban Transport. 318, B 57 AR-P02 Procurement of Landing Facility Nation-wide Upgrading 25, B 58 RW-P14 Railway Level Crossing System Java / Upgrading for Safety 31, B 59 RD-P35 Construction of Keloks 9 brigdes in West Sumatra Regional Develop. 39, B 60 RD-P40 Intelligent Traffic System for Three Cities Java / Upgrading 191, B 61 RD-P23 Galala-Poka Bridge Maluku Poverty Reduction 42, B 62 SE-P07 Patrol Boat to Enhance Maritime Safety Sumatra Upgrading safety 120, B 63 AR-P09 Procurement of aircraft for Pioneer Flight East Support Remote area 480, C 64 RD-P07 Serangan - Tanjung Benoa Toll Road Bali Regional Develop. 159, C 65 SE-P03 Special Vessel for Navigation Aids Nation-wide Upgrading safety 113, C 66 SE-P06 Indonesia Coast Guard Patrol Boats Retrofit Sumatra Upgrading safety 46, C 67 RW-P02 Railway to Juanda Surabaya Airport Java Urban transportation 150, C 68 RW-P17 Tracks Material and Turnouts Java / Upgrading quality 117, C 69 RW-P03 Double Track Rialway in South Sumatra Sumatra Upgrading 240, C 70 RD-P12 Gorontalo-Djalaludin Airport Access Road Sulawesi Regional Develop. 21, C 71 RD-P01 Road Rehabilitation Project Nation-wide Upgrading 212, C 72 SE-P14 Development of Batam Port Sumatra National Backbone 300, C 73 RD-P25 Balikpapan - Samarinda Freeway Kalimantan Regional Develop 531, C 74 AR-P08 Airport Rescue and Fire Fighting Equipment Nation-wide Upgrading 31, C 75 RD-P03 Rural Transportation Nation-wide Poverty Rediuction 212, C 76 RD-P04 Bridge Material Nation-wide Upgrading 159, C 77 AR-P07 National Aeronautical Information System Nation-wide Upgrading 7, C 78 RD-P36 South Coastal Highway in Yogjakarta Java National Backbone 117, C 79 RD-P31 Kalimantan Boarder Road Development Kalimantan Poverty Reduction 250, C 80 RD-P02 Provincial-Local Road Improvement Nation-wide Upgrading 212, C 81 RD-P37 Java Corridor Railway Corssing Flyover Java Upgrading 81, C 82 RD-P19 Eastern National Road Improvement Program East Upgrading 177, C 83 RD-P33 Metropolitan Freeways and Toll Road Java Urban Transport 213, C 84 RW-P11 Java South Line DT & Sgn (Solo - Surabaya) Java National Backbone 716, C 85 RD-P28 Bridge Construction in West Nusa Tenggara East Poverty Reduction 195, C 86 RD-P09 Kendari Bridge Sulawesi Regional Develop. 63, C 87 RD-P26 Kualanamu - Toba Lake Freeway Sumatra Regional Develop. 531, C 88 RD-P14 Gilimanuk - Denpasar Freeway Bali National Backbone 132, C 89 RD-P20 Western National Road Improvement Program Java / Upgrading 80, C Java North Line DT and Signal (Sumarang- 90 RW-P12 Java National Backbone 817, C Surabaya) 91 RD-P42 Road Network in Belawan Port Sumatra Regional 53, C 92 RD-P32 South Java Regional Road Development Java Poverty Reduction 250, C 93 RD-P24 Papua Strategic Road Development Papua Poverty Reduction 1,786, C 94 RW-P22 Railway Bridge Rehabilitation in West Sumatra Sumatra Upgrading for Safety 80, C Line Ministr y BAPPE NAS JST Fit to upper plan Ecomomi c viability Urgency Implemen tability Foreign assistance Total Rank

37 Republic of Indonesia March 2010 Figure Ranking Results of Overall Evaluation for Blue Book Inclusion of Candidate Projects (Transportation Sector)

38 (5) Detailed Analysis on the Evaluation Results and Solution Alternatives The average score of all the projects is calculated to be around 70%. Based on the evaluation, the projects are classified into three categories based on the scoring system shown as follows: Rank A Project: Score of more than 75 points Rank B Project: Score between 65 to 75 points Rank C Project: Score of less than 65 points The number of projects in Rank A is 31, also 31 in Rank B and 32 in Rank C. The regional distribution of each category is summarized as follows: Summary of Evaluation Results Most Projects in Jakarta are Rank A because of economic viability, urgency, and appropriateness for international cooperation. Many of nation-wide projects are also Rank A, which are for upgrading quality, safety, and maintenance capabilities. Many of the projects in Kalimantan, Sulawesi and East Indonesia are Rank C due to lower economic viability, less urgency, and less appropriateness for international cooperation. More Projects to be promoted in Kalimantan and Sulawesi. Urban Transportation Projects tends to be high score, on the other hand most of the poverty reduction projects are evaluated lower. Figure Evaluation Results of Candidate Projects Based on the above, it can be said that most of the projects in DKI Jakarta marked high score points and classified as Rank A Project. This is realized as many projects in DKI Jakarta are expected to be of high economic viability, urgently needed, and required high technologies seeking international cooperation. The projects in major cities also marked with generally high score. Republic of Indonesia March 2010

39 Rank Activity Name Table Rank A Projects in DKI Jakarta Region Cost (1000 US$) Project Evaluation Urgency Implement upper Plan Viability ability 1 Jakarta MRT South-North Line Jakarta 840, Tanung Priok Access Road (Phase-3) Jakarta 318, Jakarta MRT East-West Line Jakarta 1,100, Jakarta MRT South - North Line Extension Jakarta 1,000, International Hub Port in Greater Jakarta Jakarta 1,000, Jakarta Urban Road Network Flyover Jakarta 300, Railway to Soekarno Hatta Airport Jakarta 120, JABODETABEK Circular Railway Line Jakarta 160, Central Station Development in Dukhu Atas Jakarta 80, Fit to Ecomomic International Cooperaton Total The nationwide projects are also generally marked with high score, and many are classified as Rank A projects. The objectives of nation-wide projects are mainly to upgrade safety, improve service level, and strengthen security and maintenance capability and so on. These are raised as the top priorities for the transportation sector development plan as shown below: Rank Activity Name Table Rank A Nationwide Projects Region Cost (1000 US$) Project Evaluation Urgency Implement upper Plan Viability ability 10 New CNS/ATM System Development for Nation-wide 213, Public Ship Finance for Domestic Ship Industry Nation-wide 300, Procurement and Installation of Security Nation-wide 14, Airport Development for Disaster Measure Nation-wide 158, Asset Management Loan (Road) Project Nation-wide 1,000, Strategic and Local Ports Nation-wide 1,588, Fit to Ecomomic International Cooperaton Total Many projects in Kalimantan, Sulawesi and East Indonesia have rather low score, and are mostly classified as Rank C project. These are those with mainly lower economic viability, and unconfirmed urgent needs. However, the following one project in Sulawesi is evaluated as Rank A: Table Rank A Projects in Kalimantan and Sulawesi Project Evaluation Rank Activity Name Region Cost Fit to Ecomomic International Urgency Implement Total (1000 US$) upper Plan Viability ability Cooperaton 6 Trans Sulawesi Maminasata Arterial Road Sulawesi 85, The project is highly related to the regional development plan. Trans Sulawesi Arterial Road was identified in the Master Plan for Regional Development, which is directly linked with the industrial development projects. Since the river transportation project is also directly linked with coal transportation, high economic viability particularly for energy generation is expected as well as necessity for experts. From the facts mentioned above, the regional development plan formulation is quite important to promote the projects in East Indonesia for the betterment of the peoples living condition, with high economic viability. Republic of Indonesia March 2010

40 (6) Conclusions and Recommendations Based on the assessment of the candidate projects in the transportation sector, the following four aspects should be taken into account for selecting the nominated projects for inclusion in the Blue Book: Strengthening Java-Sumatra development corridor, Infrastructure development in major cities and regional growth poles Integrated development approach for East Indonesia Gateway for global market access 1) Strengthening Java-Sumatra Development Corridor Strengthening of Java-Sumatra development corridor is the most important issue, and the following measures should be taken into account to promote the infrastructure development activities: a) Acceleration of toll road projects in Java under PPP scheme Many of the toll road projects in the Trans-Java corridor are ongoing under BOT scheme, but the progress is very slow due to difficulties in land acquisition. Review of financial schemes as well as risk sharing plan should be carried out by the government to facilitate the implementation of the toll road projects. Encouraging of further government involvement through PPP scheme would be effective. b) Promotion of High Speed Rail corridor to formulate the Java Megalopolis Java Island has still high potential for leading the development of Indonesian Economy despite its highly dense population and existence of various industries. Several mega cities are scattered in Java with each city having own leading industries. Strengthening of the connection between the mega cities will accumulate more economic activities and produce synergetic effects in economics and social activities. Together with trans Java highway corridor, the High Speed Dedicated Passenger Railway connecting Jakarta and Surabaya would be expected to develop the Java Megalopolis. c) Selat Sunda Bridge The bridge/tunnel connection between Java and Sumatra should be well-assessed for future implementation, which is expected to contribute to the economic integration of both islands. Java is the center of economic activities in Indonesia with its huge source of manpower, while Sumatra has rich natural resources for initiating economic activities with potential land resources. It is also located at the front side of the global market. The direct connection with the Trans Sumatra highway would expand the economic effect of the Selat Sunda Bridge to the whole Sumatra Island. Republic of Indonesia March 2010

41 Distance between Jakarta-Surabaya is 700km, which could be transported around 2.5 hours by High Speed Rail. In Japan, Operation of Shinkansen was commenced in 1964 for Tokyo- Osaka (550km). At that time, GDP per capita of Japan was 1,900 US$. This is almost same level as Indonesia at present. The population along the planned route is estimated around 30 million including the sub-urban area, which is almost the same scale of the population with other planned high speed rail projects in Brazil and India, and much higher than the one of Vietnam. Source: Information from internet compiled by JICA Study Team Figure Comparison of High Speed Railway Projects in the World 2) Infrastructures in Major Cities and Regional Growth Poles The development of major cities and regional growth poles shall be identified in the next five-year plan, to expand the development activities in the whole of Indonesia. This is realized as it would be difficult to extend the economic impact of the infrastructure projects in Java and Sumatra to the other areas. The following cities could be identified as the development centers with the identified transportation projects: DKI Jakarta MRT Network Development (North-South Line, East-West Line) JABODETABEK Circular Railway Line Soekarno-Hatta International Airport Access Railway City Monorail Network Development New Hub Port Development New International Airport Development Tanjung Priok Access Road Development Flyover Construction for Highway Network Bandung Intra-Urban Toll Road Urban Railway Electrification Cileunyi Sumedang Dawuan Toll Road Surabaya Additional loan for Suramadu Bridge Urban Railway Electrification in Surabaya Republic of Indonesia March 2010

42 Development of Surabaya Ferry Port Railway to Juanda Surabaya Airport Medan Medan-Kualamanu Toll Road Kualamanu Lake Toba Toll Road Road network in Belawan Port Makassar Trans Sulawesi Maminasata Arterial Road Palembang Musi Bridge Improvement of River Transport (Musi River) Denpasar Serangan- Tanjung Bonea toll road Gilimanuk Depasar Freeway Padang Padan Bypass Capacity Expansion Balikpapan Pasir Panajam Bridge Balikpapan Samarinda Freeway Jayapura Development of Jayapura Port Facility Development of Airport in Papua Medan(Pop.2.0 mil) Medan-Kualamanu toll road Kualamanu-Lake Toba toll road Road network in Belawan port Padang(Pop.0.7 mil) Padang Bypass (New airport-port Access) Keloks 9 bridges in W-Sumatra Railway bridges in W-Sumatra Surabaya (Pop. 2.6 mil.) Suramadu Bridge additional loan Urban railway electrification Surabaya Ferry port Juanda Surabaya Airport Access Rail Balikpapan (Pop. 0.5 mil.) Pasir Panajam bridge Balikpapan Samarinda Freeway Makasar (Pop. 1.2 mil.) Trans sulawesi Maminasata arterial road Palembang (Pop.1.3 mil) Musi Bridge Musi River Transport DKI Jakarta (Pop. 8.8 mil.) MRT Network JABOTABEK Circular Rail Airport Access Rail City Monorail Network New International AIrport New Hub Port Development TJPK Access Road Highway Flyover develop. Source: Compiled by JICA Study Team Bandung(Pop. 2.3 mil.) Intra urban toll road Cileunyi-Sumedan-Dawan toll road Urban railway electrification Jayaura (Pop. 0.2 mil.) Jayapura port facility Airport development in Papua Papua Regional Development Denpasar (Pop. 0.6 mil.) Serangan Tanjun Bonea toll road Gilimanuk Denpasar Freeway Figure Transportation Projects in Major Cities and Regional Growth Poles Republic of Indonesia March 2010

43 3) Integrated Development Approach for Eastern Indonesia Most of the nominated transportation projects in East Indonesia, including in Kalimantan, Sulawesi, Maluku, Nusa Tenggara, Timor, and Papua, are evaluated with rather low ranks because of low economic viability and less urgency for the implementation of infrastructure development projects. In these areas, the integrated regional development approach should be taken into account for the promotion of transportation infrastructure. It is recommended that the regional development master plan be formulated to identify future production centers, industrial development areas, center of economic activities and so on. Based on these regional development strategies, the transportation infrastructure development should be formulated. A good example is the Trans Sulawesi Manimasata Arterial Road Project. The Project is evaluated as the highest in rank among the projects located in East Indonesia. The project was identified in the Integrated Spatial Plan for Mamminasata Metropolitan Area, July 2006 by JICA, and was well assessed considering the importance of the road network for regional economic development. As a result, the identified transportation project is expected to have high synergetic effects with agro-industrial development, and tourism development. Consequently, high economic viability is expected as the final result. Republic of Indonesia March 2010

44 Integrated Regional Development Approach (Integrated Spatial Plan for Mamminasata Metropolitan Area, Sulawesi ) Regional development plan will formulate direct linkage between land use plan and Infrastructure development Plan Land Use Plan Infrastructure Development Plan Integrated Spatial Plan for Mamminasata Metropolitan Area, JICA 2006 Figure Infrastructure Plan by Integrated Regional Development Approach 4) Gateway for Global Market Access Although there is a huge development potential in the domestic market of Indonesia, strengthening the linkage with the global market such as GMS Region, India, China, and East Asia would be necessary for Indonesia in the future to sustain its economic development alongside the leading countries initiating the global economic activities. There are three gateways identified based on the existing global economic corridors, namely, Jakarta Port, North Sumatra and Riau (Batam, Dumai, Belawan), and Bitung in Sulawesi. It is recommended that the three port areas be developed with an integrated approach, which should be executed together with the access road, land development and industrial development. Republic of Indonesia March 2010

45 Gateway to Global Economic Corridors Western Gateway 1) Dumai Port / Pekanbaru-Dumai Toll Road 2) Batam Port / Batam-Bintang Bridge 3) Belawan Port / Port Access Network National Gateway 1) Tanjung Priok Port Expansion 2) Tanjung Priok Access Road Network 3) New Hub-port construction 4) Access b/w New hub-port and Industrial Areas Eastern Gateway 1) Bitung Port Development 2) Bitung-Manado Toll Road Source: JICA Study Team Figure Indonesian Gateways to Global Economic Corridors Republic of Indonesia March 2010

46 4.2 Power Sector In the early 1990s, a good number of Independent Power Producers (IPPs) were introduced in Indonesia to cope up with the rapid growth of electricity demand in the country. At that time, about 30 IPP projects with a total installed capacity of 11,000 MW were initiated. Due to slowdown in the power demand growth from 13% in 1997 to 1.5% in caused by the 1997 Asian financial crisis and a significant drop in the value of the rupiah, Indonesia s state-owned electric utility company, PLN, had to renegotiate the Power Purchase Agreement (PPA) with the IPP developers in June After renegotiation with these IPP developers, the government assessed these projects and classified them into three categories, i.e., "continue", "postpone and re-examine. As a result of the classification, projects classified as continue were only ten projects with total installed capacity of 4,755 MW, which is less than half of the capacity which was initially agreed 2. Under these conditions, power development projects after the 1997 crisis were not fully implemented, due to lack of confidence of power development investors influenced by the result of renegotiation mentioned above and less attractive investment climate. Electrification rate of the country Table below shows the growth of household electrification rate 3 before and after the 1997 crisis. Despite the severe economic conditions, several countries like Vietnam and Mongolia achieved sharp increase of electrification ratio from less than 20% level to more than 70% level. The reasons for the electrification rate increase in Vietnam seem to be due to: (i) strong power development initiatives through the establishment of the Electricity of Vietnam (EVN, a corporative state-owned company), and (ii) steady progress of power development projects using ODA loan. However, it is noted that island nations like Indonesia and the Philippines need more cost to further increase the electrification rate compared with continental countries. Table Growth of Electrification Rate before and after 1997 Financial Crisis Electrification Rate (%) Country Singapore China Malaysia Mongolia Thailand Vietnam Philippines Indonesia Cambodia Myanmar 10 5 Source: INDONESIA, Averting an Infrastructure Crisis 1 PLN Annual Report 2 IEEJ November Electrified household/total number of household Republic of Indonesia March 2010

47 4.2.1 Current Development Program Background At the time of RPJM formulation, one of the key policy directions of the power sector was to reform the power supply industry. This policy was initiated considering issues such as: (1) Unbalanced supply and demand; (2) Low level of rural electrification; (3) Decrease of investment in the power sector; and (4) Uneconomical tariff structure. Programs in RPJM To overcome the issues mentioned above, the GOI formulated the demand forecast and investment plan for RPJM which is summarized as follows: - Assumption for power demand growth rate: 8.3% per year (average economic growth: 6.6%) - Total power demand to increase from TWh in 2004 to TWh in Household electrification ratio will increase from 56.1% in 2004 to 67.9% in Potential 10 million new customers in five years For Java-Madura-Bali (Jamali) system: - Assumption for power demand growth rate: 7.8% per year - Additional installation of : generating capacity of 6,100 MW transmission line: 3,720 km substation capacity of 14,276 MVA For Outer Islands: - Assumption for power demand growth rate: 10.2% per year - Additional installation of: generating capacity of 4,400 MW transmission line of 3,720 km substation capacity of 4,120 MVA For rural electrification program: - Village electrification rate: 97% in 2009 Republic of Indonesia March 2010

48 National Energy Policy and Energy Blueprint In 2004, the GOI formulated the National Energy Policy which focused on the following three major policies: 1) Reinforcement of energy supply, 2) Variation of energy sources, and 3) Promotion of energy saving. With the declaration of the National Energy Policy, the government has changed its view on energy from abundant to limited. In 2005, the national energy blue print was announced based on the National Energy Policy stipulating the target indicators for energy mix and aiming at reducing oil dependency and promoting the development of coal and other renewable energy. The following figure shows the energy mix target presented in Presidential Decree No. 5/2006. It is mandated in the decree that an optimum energy mix should be achieved in 2025 consisting of: (i) less than 20% of oil; (ii) more than 30% of natural gas; (iii) more than 33% of coal; (iv) more than 5% of bio fuels; (v) more than 5% of geothermal; (vi) more than 5% of other new and renewable energy, especially biomass, nuclear, hydro, solar and wind; and (vii) more than 2% of liquefied coal. National Energy Mix 2025 Natural Gas, 30.0% Coal, 33.0% Oil, 20.0% New and Renewable, 17.0% Biofuels 5% Geothermal 5% Biomass, Nuclear, Hydro, Solar, Wind 5% Liquefied Coal 2% Source: Presentation Material from MEMR Figure Energy Mix Target in 2025 Additional Programs (Fast Track Programs) Apart from RPJM , the GOI announced the non-oil-based power development promotion project called Fast Track Program 4 (FTP-1) in 2006 to avert the deficit of power supply in the country. This program was aimed at developing additional power supply capacity of 10,000 MW through the construction of coal-fired power plant during the period from 2006 to Some financial and administrative problems caused substantial delays in implementing some of these projects. In addition to FTP-1, another 10,000 MW will be developed under FTP-2 using renewable energy sources such as hydro and geothermal, among others. FTP-2 was announced by Presidential 4 It is occasionally called as Crash Program mainly by mass media. Republic of Indonesia March 2010

49 Decree No. 5/2010 on January 08, 2010 while the detailed project list was prescribed by Ministerial Decree No. 2/2010 on January 27, FTP-2 also includes coal and natural gas as sources for power generation. In view of environmental friendliness, FTP-2 stipulates that the coal power generation project should apply clean coal technologies (CCTs) Progress of Development The progress of development of the power sector during the RPJM period can be summarized as follows: (1) Generating capacity According to the material provided by BAPPENAS, it was scheduled to add more than 10,000 MW of power supply capacity to meet the growing demands during the period of RPJM The actual supply capacity installed was less than 4,000 MW, which is less than half of the target capacity. According to the Planning and Technology Directorate of PLN, the poor project performance was attributed mainly to stalled project financing, especially for those projects funded by foreign investment or loans that were badly affected by the global recession. The PLN Annual Report 2007 indicated that about 4,000 MW of additional generating capacity was placed into the PLN grid during 2003 to This means that the average of only 1,000 MW (4-5% growth) per year was added into the national grid while the projected electricity demand growth rate was 7.8% per year in Jamali and 10.2% per year in the outer islands (refer to Table and Figure below). Table Generating Capacity of PLN by Sources and its Growth Rate Year Hydro Power Plant 3,168 3,199 3,221 3,529 3,501 Diesel Generated Power Plant 2,670 2,933 2,994 2,954 2,968 Gas Fired Power Plant 1,225 1,481 2,724 2,727 2,783 Gas Steam Fired Power Plant 6,863 6,561 6,281 7,021 7,021 Geothermal Power Plant Coal Steam Fired Power Plant 6,900 6,900 6,900 8,220 8,534 Total (MW) 21,206 21,469 22,515 24,846 25,222 Growth rate (%) Source: PLN Annual Report Explanation on CCTs are given in Sub-section Progress of Development, (2) Energy Mix, Coal. Republic of Indonesia March 2010

50 Generating Capacity of PLN (MW) 30,000 Coal Steam Fired Power Plant Generating Capacity (MW) 25,000 20,000 15,000 10,000 5,000 6, ,863 1,225 2,670 3,168 6, ,561 1,481 2,933 3,199 6, ,281 2,724 2,994 3,221 8, ,021 2,727 2,954 3,529 8, ,021 2,783 2,968 3,501 Geothermal Power Plant Gas Steam Fired Power Plant Gas Fired Power Plant Diesel Generated Power Plant Hydro Power Plant Year (2) Energy Mix Source: PLN Annual Report 2007 Figure Generating Capacity of PLN by Sources The current energy mix (as of 2008) is shown in Figure Natural Gas, % Hydro, % Primary Energy Consumption by Fuel (2008) (Unit: Mil. TOE) Coal, % 46.1% Oil, 57.4 Oil Coal Natural Gas Hydro Source: BP Statistical Review of World Energy June 2009 (TOE: Tonnes of Oil Equivalent) Figure Primary Energy Consumption by Fuel (2008) To achieve the energy mix target in 2025, further reduction of oil usage and strong promotion of renewable energy sources are of great importance in the power sector. The following three graphs show the energy production and consumption during the last decade by the type of energy presented in Figure Republic of Indonesia March 2010

51 Oil Production and Consumpution of Oil Million Ton Production 30 Consumption Year Source: BP Statistical Review of World Energy June 2009 Figure Production and Consumption of Oil ( ) In the 1990s, Indonesia s oil production exceeded its consumption supported by its daily production rate of 1.5 million barrels per day. However, since the late 1990s, many of the country s largest oil fields have continued to decline in output while the domestic oil consumption has been growing steadily. As a result, Indonesia became a net oil importing country in Under such conditions, it is necessary to make serious efforts to decrease the country s oil dependency. Coal Production and Consumpution of Coal Million TOE Production Consumption Year Source: BP Statistical Review of World Energy June 2009 Figure Production and Consumption of Coal ( ) On the other hand, the development of coal has been progressing very well in the last decade. The production amount almost tripled in the last ten years. As of 2005, Indonesia was the second largest net exporter of coal in the world. Such huge surplus of coal production will contribute to the energy mix target to increase the share of coal. The increased production of coal will be a strong driving force for the 10,000 MW coal-fired power development plan (Fast Track Program-1). To make full Republic of Indonesia March 2010

52 use of the country s coal reserves, it is necessary to develop transportation infrastructures to carry coal to demand centers. The development and usage of coal have environmental concerns, and one of the solutions to prevent the negative impact is the application of Clean Coal Technologies (CCTs). In the World Energy Outlook 2008, CCTs are described as follows: Clean coal technologies (CCTs) are designed to enhance the efficiency and the environmental acceptability of coal extraction, preparation and use. CCTs can be applied to achieve a good balance between economic development and environment conservation, i.e., to keep the target growth of GDP on the one hand while reducing the CO 2 emission on the other hand. For example, high efficiency pulverized coal-fired power generation technology (ultra super critical steam condition) is one of the CCTs in the coal utilization category. Other examples are NOx/SOx reduction technologies that can be applied to new/existing coal-fired power plants as environmental countermeasures. In this regard, CCTs should be applied to achieve sound development of coal resources. Natural Gas Production and Consumpution of Natural Gas Million TOE Production Consumption Year Source: BP Statistical Review of World Energy June 2009 Figure Production and Consumption of Natural Gas ( ) Indonesia is the tenth largest holder of proven natural gas reserves in the world and the single largest in the Asia-Pacific region. More than 70% of the country s natural gas reserves are located offshore, with the largest reserves found in Natuna Island, East Kalimantan, South Sumatra, and West Papua. Nearly half of the produced natural gas is mainly for export and the rest is for domestic use. The major countries for export are Japan, Singapore, South Korea, and Taiwan. Considering the target energy mix in 2025, further promotion of natural gas development should be initiated since natural gas emits less green house gas compared with coal. Republic of Indonesia March 2010

53 In spite of abundant reserves in Indonesia, domestic use of natural gas is limited due to lack of gas pipeline networks. To address this issue, the PGN (Government Gas Company) has prepared five gas transmission projects and is currently implementing them. Table Domestic Natural Gas Pipeline Development Plan No. Location Length Capacity (MMCFD) Construction Cost (Mil. US$) Target Year of Operation 1 South Sumatra ---West Java Phase 1 445km South Sumatra ---West Java Phase 2 649km Duri---Medan 521km East Kalimantan ---Central Java 619km East Java --- West Java 700km n.a Source: IEEJ Report August Duri --- Medan 4 East Kalimantan --- Central Java 1 South Sumatra ---West Java Phase 1 2 South Sumatra ---West Java Phase 2 5 East Java --- West Java Source: MEMR Figure Locations of Existing Domestic Gas Pipelines and Major Development Plans The target energy mix and its achievement The graph below shows the target ratio and its achievements on energy mix as sources for power generation during the RPJM period. Based on the graph, the ratio of oil usage is still high in spite of its price hike, which was not expected during the planning stage of RPJM The oil usage is much encouraged by the government subsidy policy, which enables PLN to procure oil at a price below the actual production cost. To reduce its dependency on oil, the government abolished the subsidy on oil products in 2005 which was triggered by the hike of oil prices. This abolishment of fuel oil subsidy has made PLN to consider the fuel switch from oil to coal and renewable energy sources. Republic of Indonesia March 2010

54 The use of natural gas remains low because of insufficient existing gas pipeline networks and delay in pipeline network development. Due to lack of gas supply, some combined cycle power plants are obliged to burn high speed diesel (HSD) oil, which is far more expensive than natural gas. Based on rough estimates, the unit generation cost (Rp/kWh) by burning HSD will be 1.5 times to 2 times more expensive than using natural gas. According to information from PLN, the following power plants are using HSD in lieu of natural gas, which worsens the efficiency and financial balance of the power plant: - Muara Tawar 920 MW (Jamali system) - Grati 462 MW (Jamali system) - Gresik 1,579 MW (Jamali system), and - Belawan 817 MW (North Sumatra system). (* Jamali: Java-Madura-Bali) Energy Mixture Target and Achievement in RPJM % Oil Natural Gas Coal New & Renewable Energy source Energy Target Achievement Source: BAPPENAS Figure Target and Achievement of Energy Mixture in RPJM To fill the shortage of natural gas, coal was developed and used as an alternative energy source. The ratio of new and renewable energy is still low with less than 5% of total energy use. Hence, further acceleration of new and renewable energy development is needed. (3) Electrification rate 1) Household electrification rate By 2007, the household electrification rate has increased to 64.3 % for the whole Indonesia. Figure shows the household electrification rate by province. The household electrification rate of more than 60% has already been achieved in Java Island and the north-western part of Sumatra Island. But in the rest of the provinces, especially in Nusa Tenggara Islands and Papua, the rate is still low at about 30%. Republic of Indonesia March 2010

55 NAD 74,91% Sumbar 68.72% Jambi 48.85% Bengkulu 50.08% Lampung 47,66% Banten 72,11% Electrification Rate Sumut 69,32% Electrification Rate by Province Riau + Kepri 54,66% Sumsel 49,80% Kalbar 45,65% Babel 72,45% Jakarta 100% Jabar 64,95% Jateng 70,60% Kalteng 44,33% Kalsel 71,39% Jat im 71,08% Jogya 79,64% Kaltim 68,37% Sulsel 54,90% Bali 74,42% NTB 31.99% Gorontalo 48,70% Sulteng 47,64% Sultra 38,21% NTT 24.24% Sulut 66,62% Maluku 55,36% Category: > 60 % Malut 47,81% % % Papua + Irjabar 32,05% Tahun % 16% 28% 43% 53% 62% 63% 64,34% Source: Presentation Material of MEMR Figure Household Electrification Rate by Province 1 2) Village electrification rate Indonesia has achieved 91.9% of village electrification rate in Most provinces in Java Island have achieved more than 98% of village electrification. In Sumatra Island, except for North Sumatra and Nanggroe Aceh Darussalam (NAD) provinces, village electrification of more than 90% has already been achieved. NAD 86,81% Sumbar 100% Jambi 98,62% Bengkulu 91,32% Lampung 100% Banten 98,99% Sumut 83,62% Riau + Kepri 97,63% Sumsel 95,50% Babel 98,13% Jakarta 100% Jabar 99,71% Jateng 100% Village Electrification Rate Kalbar 95,56% Kalteng 87,89% Kalsel 99,28% Jogya 100% Jat im 99,71% Kaltim 91,72% Sulsel 100% Bali 100% NTB 100% Gorontalo 95,80% Sulteng 98,04% Sultra 94,72% NTT 89,02% Sulut 100% Maluku 79,91% Category : 100% 90% < 100% > 50% < 90% 50% Malut 91,55% Papua + Irjabar 30,16% Source: Presentation Material of MEMR Figure Village Electrification Rate by Province Republic of Indonesia March 2010

56 On the other hand, village electrification rate is still low at 30% in the eastern part of Indonesia, especially in Papua provinces,. Figure shows the location of villages in Indonesia without electricity. Of the 71,555 villages in Indonesia, 65,776 villages (92%) have already been electrified by There are still 5,779 villages without electricity. Villages without electricity Villages with electricity Source: Presentation Material by MEMR Figure Location of Villages without Electricity According to the Ministry of Energy and Mineral Resources (MEMR), village electrification will be done by PLN for its grid extension area. Those areas out of PLN grid will be electrified through government assistance. Possible energy sources are either by micro hydro mini-grid, solar mini-grid, solar home systems, or wind power. If none of these energy sources are available, diesel will be utilized. During the RPJM period, a total budget of Rp 1.5 trillion was allocated for rural electrification in the off-grid areas. The selection and/or determination of suitable energy sources for electrification should be prioritized to estimate the required cost in order to achieve the target of rural electrification. (4) Transmission line and substations Development progress of transmission lines and substations is also one of the key indicators to measure achievements of the power supply infrastructure in the national target. Table shows the accomplishments in the development of transmission lines and substations during the period from 2003 to Compared with the target transmission line development of 7,440 kmc during the RPJM period, only about 5,000 kmc was achieved during the period from 2003 to 2007 or about 2,500 kmc less than the development target. This delay of transmission line development was to some extent affected by the less development of installed generation capacity as discussed in the preceding section. The tsunami disaster in 2004 destroyed several transmission and substation Republic of Indonesia March 2010

57 facilities, which resulted to the decrease of substation transformer capacity in 2005 as shown in the table below. Table Development of Transmission Line and Substations Transmisson Line (kmc) kv kv 5,035 4,726 4,726 4,619 4, kv 19,519 22,229 22,381 23,238 22, kv kv 3,608 3,578 3,578 5,048 5,048 Total Length (kmc) 28,174 30,793 30,945 32,917 33,162 Increase from prev. year 2, , ,988 (Increase ratio %) 9.3% 0.5% 6.4% 0.7% 17.7% Substation Trans former Capacity (MVA) 53,399 54,128 53,976 54,527 58,713 Increase from prev. year ,186 5,314 (Increase ratio %) 1.4% -0.3% 1.0% 7.7% 10.0% Source: PLN Annual Report 2007, Statistics PLN 2003~2007 *Decrease in Substation Transformer Capacity in 2005 is caused by the tsunami disaster in Nanggroe Aceh Darussalam province. (5) New Electricity Law In September 2009, the Parliament passed a new law called Law No. 30/2009 on Electricity to replace the existing Law No. 15/1985. The major characteristics of Law No. 30/2009 are as follows: Item Power Development Plan Responsibility of Electricity Business Implementation Previous Electricity Law (No.15/1985) Central government formulates RUKN (National electricity general plan) By PLN, under control of the central government New Electricity Law (No.30/2009) Central government formulates RUKN (National comprehensive power development plan). Local governments formulate regional electricity general plan (RUKD) based on RUKN. Central and local governments will jointly implement electricity business under control of the central government Implementation of Electricity Business Rural Electrification Electricity Tariff Basically by PLN. Exceptionally, by cooperatives and other entities. By PLN in principle, under the responsibility of the central government Uniform all over the nation Need approval by the President PLN, Public enterprise, Private enterprise, Cooperatives, community-based organization Obligation of PLN in case of Public enterprise, Private enterprise, Cooperatives, etc. are not able to electrify. Tariff is determined through approval of the Parliament. Regional tariff can be set independently through approval of local assembly (regional tariff) Republic of Indonesia March 2010

58 Before the new law, the formulation of the national power development plan (RUKN) was under the authority of the MEMR and the change of electricity tariff was under the authority of the President. However, with the new law, such formulation and revision need approval of the Parliament. (6) National Climate Change Action Plan In September 2009, the President, Mr. Susilo Bambang Yudhoyono, declared that Indonesia had decided on a national climate change action plan that will reduce greenhouse gas emissions by 26% by 2020 from BAU (Business As Usual). Further, he declared that Indonesia could reduce emissions by as much as 41% with international support. This announcement was made during the G20 leaders meeting on September 25, Such target percentage was based on 2005 emission levels. Indonesia is the first developing country who announced an emissions reduction target Remaining Issues From the review of the development program and progress presented in the preceding sub-sections, the remaining issues on the power sector can be highlighted as follows: (1) Shortage of power supply capacity in some regions (2) Waiting users and captive power (3) Tariff Issues (4) Lack of policies for rural electrification (5) Lack of coordination between central and local governments in handling development permissions related to power development projects (6) Less development of energy mix (7) Regulatory issues (8) Challenges as the first developing country that declared a National Climate Change Action Plan Detailed descriptions of above eight items are given hereunder. (1) Shortage of power supply capacity in some regions There are 26 electricity systems in Indonesia as shown in Table However, several regions experience power interruptions during peak hours due to insufficient power supply capacity. These areas with critical conditions are: (1) NAD and North Sumatra, (2) Tanjung Pinang in Riau, (3) Barito in South Kalimantan, (4) Sampit in Central Kalimantan, (5) Gorontalo, and (6) Jayapura in Papua. In Republic of Indonesia March 2010

59 these regions, low voltage or sudden power interruptions are being experienced which affect the development of their economy and industry. Table Status of Installed Capacity and Peak Loads in each Electricity System in Indonesia (as of September 2008) NO. ELECTRICITY POWER SUPPLY PEAK LOADS BALANCE PROVINCE SYSTEMS CAPACITY (MW) (MW) (MW) STATUS 1 Sumbagut 1, , Deficit NAD & North Sumatra 2 Nias (Isolated) Standby 3 Tg Pinang Deficit Kep. Riau 4 Batam Normal 5 Sumbagsel Riau, West Sumatra, South 1, , Standby 6 Kerinci (Isolated) Sumatra, Jambi, Bengkulu, Normal 7 Bangka Standby Bangka Belitung 8 Belitung Normal 9 Pontianak Standby West Kalimantan 10 Singkawang Normal 11 Barito South Kalimantan Deficit 12 Sampit Central Kalimantan Deficit 13 Mahakam Standby East Kalimantan 14 Bontang Standby 15 Minahasa North Sulawesi Standby 16 Palu Central Sulawesi Standby 17 Gorontalo Gorontalo Deficit 18 Poso Central Sulawesi Standby 19 Sulsel South Sulawesi Standby 20 Kendari South-Eastern Sulawesi Standby 21 Ambon Maluku Standby 22 Ternate North Maluku Standby 23 Jayapura Papua Deficit 24 Lombok West Nusa Tenggara Standby 25 Kupang East Nusa Tenggara Normal 26 Jamali Banten, West Java, DKI Jakarta, Central Java, DIY, East Java, Bali 16, , Standby Source: Presentation Material by MEMR SUM BAGUT Dayamampu : 1.138,30 MW Peak Load : 1.277,00 MW Defisit : -138,70 MW Tj. PINANG Daya mampu Peak Load Defisit : 26,40 MW : 34,50 MW : -8,10 MW BARITO Daya mampu Peak Load Defisit : 243,00 MW : 289,00 MW : -46,00 MW GORONTALO Daya mampu : 25,95 MW Peak Load : 26,40 MW Defisit : -0,45 MW JAYAPURA Daya mampu : 33,77 MW Peak Load : 34,50 MW Defisit : -0,73 MW SAM PI T Daya mampu : 13,40 MW Peak Load : 13,45 MW Defisit : -0,05 MW Source: Presentation Material by MEMR Figure Areas with Critical Electricity Conditions (as of September 2008) Apart from these critical regions, there are nine regions with reserved capacity of less than 5%. These regions may possibly become critical as well since the regional industry and economy demands are growing. (2) Waiting users and captive power Table shows the number of applicants for new connections to PLN with their connecting capacity in megawatt (MW). Nearly one million customers all over the nation, equivalent to 3,500 MW capacity, are still waiting for new connections. In Java, the ratio of connected users is more than 75%, but outside Java, about 60% of customers are still waiting for connections. The quantity Republic of Indonesia March 2010

60 of waiting users should be counted as deficit from the current supply balance, and thus it is urgently needed to develop additional power supply to satisfy the required demands. Table Waiting Users for PLN Connections in Capacity (MW) Source: Statistics PLN 2007 According to PLN Statistics 2007, there are about 7,500 MW of captive power to complement the power supply deficit. Most of these captive power users such as factory owners have suffered from high oil prices since Significant increases in power capacity with less costly, non-oil-based energy sources will be necessary. Furthermore, new transmission and distribution networks should be developed accordingly. (3) Tariff issues Electricity tariff does not cover the production cost. Figure shows the schematic diagram of electricity tariff and subsidy by type of PLN users. The dark brown shade in the figure below indicates the amount of subsidy. It is noted that all types of users rely on subsidies. Source: PLN Annual Report 2007 Figure Electricity Subsidy in 2007 Republic of Indonesia March 2010

61 In 2007, the total subsidy from the government amounted to Rp trillion, equivalent to more than 30% of the total production cost. The subsidy is not exclusive for low-income household users but also for other types of users, including business and industrial users. According to the MOF, the electricity subsidy was only 0.3 % of GDP in In 2008, however, the ratio of subsidy was estimated to have reached 1.9 % of GDP. According to data from PLN, the current average sales price of electricity is about Rp 600~700 per kwh while the average cost of generation is around Rp 1,000 per kwh. The negative discrepancy between the electricity tariff and the production cost causes the following problems to the power sector: 1) The amount of subsidy put pressure on the national budget. If such amount could be utilized as development fund, additional power supply can be provided and the power shortage can be mitigated. 2) The IPPs are having difficulties in the recovery of their investment cost because of the restricted tariff rate set by the authorities. Therefore, IPPs are hesitant to invest in the power sector. 3) With the current tariff rate schedule wherein all types of users are subsidized, the concept of subsidizing users in higher generation cost areas such as rural and remote villages, which is practiced in other countries, would not be possible. 4) Low tariff rates encourage excessive use of electricity. Furthermore, the current system for electricity subsidy is regarded as an order of the government to PLN as a public service obligation (PSO) executor. Such government order system makes PLN execute the obligation without any regard that it is an electricity business enterprise. Therefore, there seems to be no incentives for PLN to increase new customers to expand their business opportunities. (4) Lack of policies for rural electrification Although the government set the target of 100% village electrification by 2015 and 67.2% of household electrification by 2020, there seems to be no roadmap showing how to achieve the target. Without such roadmap, it is difficult to rationalize the need of electrification, the target area, the sources of electricity, and the necessary funds for development. The initial investment costs for the development of rural electrification would be higher than the current supply area since the target areas are located in more remote areas. In addition, there is a government policy that rural areas should utilize renewable energy wherever possible 6 despite the fact that the initial investment costs for renewable energy sources are higher than conventional energy sources. As discussed in the previous section, there is no space for squeezing development funds for rural electrification. 6 National Electricity General Plan (RUKN) , November 13, 2008 Republic of Indonesia March 2010

62 To achieve the targets of rural electrification, it is necessary to prepare a comprehensive roadmap which includes arrangement of development funds for rural electrification. (5) Lack of coordination between central and local governments in handling development permissions related to power development projects It is evident that the local government is extensively involved in handling several important power development projects which contradicts with the national priority and importance and causes substantial delay and, in some cases, suspension of the project. This is because of lack of coordination between the central and local governments. For example, there are several cases whereby permissions for power development projects are not issued by the prefectural or provincial governor, although these projects are ready for construction. It is, of course, necessary to respect and obey the laws related to autonomy, however, close coordination between central and local governments are essential for the smooth implementation of power projects of national importance. (6) Less development of energy mix An energy mix policy was formulated in 2004 as part of the National Energy Policy mentioned in Section to decrease the nation s dependency on oil. Figure shows the expected achievement of energy mix in RPJM The target value of 50% was successfully achieved for oil dependency. However, the target mix for natural gas failed to reach the target level and the deficit was covered by coal energy. It appears that the shortage of mix ratio for natural gas is due mainly to lack of development of gas pipeline networks, which was affected by the ambiguous government policy on natural gas development. The government s policy on the development of natural gas for domestic or export uses is unclear which may have held back investments on natural gas pipeline networks during the RPJM period. The ratio of new and renewable energy for the current energy mix (as of 2009) compared with the energy mix target in 2025 is still low as shown in Figure By looking at Figure , efforts should be made to further decrease oil dependency and to further accelerate the development of new and renewable energy. Republic of Indonesia March 2010

63 100% 80% 60% 40% Oil, 49% Coal, 26% New & Renewable 4% 20% 17% 33% 20% 0% Natural Gas, 21% 30% Figure Current Energy Mix and 2025 Target Although there are some barriers in the development of new and renewable energy, it is necessary for Indonesia to accelerate the development of such energy sources to achieve the 2025 energy mix target. (7) Regulatory issues There used to be several issues related to regulations, especially on the abandoned Law No. 20/2002 on Electricity. However, with the new law, Law No. 30/2009 on Electricity, in place, some of the issues are being solved. For example, revision of the tariff table is underway. Another regulatory issue is the one related to geothermal power development wherein the survey and development rights are awarded through tendering procedures. Tenderers are then required to submit the cost of development of steam and selling price of electricity at the time of tendering prior to their actual survey and development and any cost which cannot be recovered by the selling price will be the developer s risk. This situation makes developers hesitant in investing for development. Likewise, the current regulation inhibits the possibility of investigating geothermal potential under public financing. Thus, it is necessary to revise related laws and regulations to enable investigations by public fund in order to mitigate the risks of private developers. (8) Challenges as the first developing country who declared National Climate Change Action Plan As discussed in the preceding sub-section, Indonesia had declared its 2020 target to reduce greenhouse gas emission by 26% to 41% compared with 2005 level. Indonesia should tackle the issues of implementing this action plan while achieving strong economic growth on the other hand. Republic of Indonesia March 2010

64 These remaining issues described in this sub-section can be summarized as follows: Remaining Issues (RIs) (RI-1) Critical Power Supply Regions Regions with Supply Capacity < Peak Load 1) Sumbagut (NAD & North Sumatra) : MW 2) Tg. Pinang (Kep. Riau) : MW 3) Barito (South Kalimantan) : MW 4) Sampit (Central Kalimantan) : MW 5) Gorontalo (Gorontalo) : MW 6) Jayapura (Papua) : MW (as of Sept. 2008) (RI-2) Waiting Users 1 million waiting users with 3,500 MW in capacity (RI-3) Tariff and Subsidy Issues Electricity tariff is too low. 1) Electricity tariff does not cover the production cost 2) IPP developers hesitant to invest 3) Difficult to recover the investment 4) Low tariff may encourage overuse of electricity. Large Amount of Subsidy from the Government 1) Rp 37.5 trillion (in 2007) 2) More than 30% of production cost subsidized. 3) Average production cost: Rp 1,000/kWh 4) Average tariff: Rp 600~700/kWh 5) All type of users subsidized. 6) Amount of subsidy is nearly 2% of GDP in ) Puts pressure on national budget (RI-4) Lack of Policies for Rural Electrification No roadmap prepared to determine/estimate: 1) Areas to electrify 2) Type of energy sources for electrification 3) Necessary fund for electrification (RI-5) Lack of coordination between central and local governments Issuance of development permission takes time to coordinate between central and local governments Delay in implementation (RI-6) Less Development of Energy Mix 1) Delay in development of natural gas 2) Less development of renewable energy Less than 5% of primary energy use. (RI-7) Regulatory Issues Preparation of detailed regulations of the new electricity law (Law No.30/2009) and their application (RI-8) Challenges as the first developing country that declared a National Climate Change Action Plan Republic of Indonesia March 2010

65 4.2.4 Action Plan to Address the Issues From the preceding sub-sections, relationship between issues of the power sector can be summarized as follows: Remaining Issues (RI-1) Critical Power Supply Regions (RI-2) Waiting Users Action Plans (AP-1) Enhancement of Power Supply Capacity Acceleration of Power Development With due consideration to Energy Mix Acceleration of Development for Backbone Transmission Line Networks Substations Distribution Line Networks (AP-2) Application of Demand-Side Management Use of less energy-consuming electronic appliances (LED etc.) Management for Energy Efficiency and Conservation (EE&C) Remaining Issues (RI-3) Tariff and Subsidy Issues Action Plans (AP-3) Revision of Tariff Table that can cover the generation cost To increase revenue for: Sound operation of PLN and other electricity suppliers Attractive investment environment for investors (AP-4) Reduction of Subsidy Subsidize only low-income customers Cross subsidize development cost for remote areas electrification, if fund sources are available (AP-5) Acceleration of Power Development that contributes to: Reduction of the power generation cost For example, coal-fired, geothermal, and hydropower development Republic of Indonesia March 2010

66 Remaining Issues (RI-4) Lack of Policies for Rural Electrification Action Plans (AP-6a) Preparation of Roadmap for Rural Electrification To determine/estimate: Regions to electrify Energy source for electrification Cost for electrification Organization for Operation and Maintenance (AP-6b) Implementation of the development programs presented in the Roadmap Remaining Issues (RI-5) Lack of coordination between central and local governments Action Plans (AP-7a) Close coordination between central and local government (AP-7b) Clarification of roles between central and local governments in terms of development projects related to the power sector (AP-7c) To fill gaps of understanding between central and local government Development Coordination Meeting etc. Remaining Issues (RI-6) Less Development of Energy Mix Action Plans (AP-8) Promotion of renewable energy and natural gas infrastructure development Hydropower, Geothermal Need for timely implementation of F/S, D/D and related studies to confirm the potential to be ready for construction Application of Feed-in-tariff for geothermal Natural gas supply infrastructure development Republic of Indonesia March 2010

67 Remaining Issues (RI-7) Regulatory/Institutional Issues Action Plans (AP-9) Regulations in revision/transformation New electricity law Preparation of detailed regulations Acceleration of renewable energy development Application of Feed-in-tariff system for geothermal Remaining Issues (RI-8) Challenges as the first developing country that declared a National Climate Change Action Plan Action Plans (AP-8) Promotion of renewable energy and natural gas supply infrastructure development Detailed descriptions of the above ten major action plans (APs) are given hereunder. (AP-1) Enhancement of Power Supply Capacity (AP-2) Application of Demand-Side Management (AP-3) Revision of Tariff Table that can cover the generation cost (AP-4) Reduction of Subsidy (AP-5) Acceleration of Power Development that contributes to reduction of power generation cost (AP-6) Preparation and Implementation of Roadmap for Rural Electrification (AP-7) Close coordination between central and local government (AP-8) Promotion of renewable energy and natural gas supply infrastructure development (AP-9) Regulations in revision/transformation Republic of Indonesia March 2010

68 (AP-1) Enhancement of Power Supply Capacity Enhancement of power supply capacity is one of the most important objectives of the power sector. To achieve this objective, the following concrete actions should be taken: (1) Acceleration of power development with due consideration to energy mix target PLN formulated the national general electricity plan called RUPTL in Power development should be implemented based on RUPTL. In addition to RUPTL, it is recommended to consider the national target of energy mix when selecting the type of energy for power development. The accelerated development of new and renewable energy sources should be considered, such as hydropower and geothermal power which are indigenous and less developed against their potential, to fill the targets of both power deficit and energy mix. Hydropower development acceleration To accelerate hydropower development, the following approaches are recommended: 1) Deeper considerations should be taken on both natural and social environment issues caused by the project as well as the project s technical feasibility in the formulation of a ready-to-implement hydropower development plan. 2) The following measures should be considered for more effective use of the existing hydropower stations: a) Rehabilitation/improvement of mechanical equipment of the hydropower plant; and b) Countermeasures for sedimentation in the reservoir of the hydropower stations. Geothermal power development acceleration The government has its policy that development of geothermal power should be carried out mainly by IPPs. It is desirable for the government to bear the cost of related investigative studies to reduce the risk of private developers and to create attractive investment climate. For instance, there is a scheme to support geothermal development in Europe and Central Asia called Geothermal Energy Development Fund (GeoFund) prepared by the World Bank and GEF. The major functions of the GeoFund are: (1) to mitigate the risk of geothermal energy exploitation by preparing geothermal database or atlas to support identification of geothermal projects; and (2) to provide contingent grants or low cost loans to cover the project cost. From the institutional point of view, the introduction of (1) geothermal specific fixed tariff structure such as Feed-in-tariff, or (2) tax exemption scheme for renewable energy related equipment, should be considered to promote aggressive participation of private investors in power development. These are being considered by BAPPENAS and the Ministry of Energy and Mineral Resources. Republic of Indonesia March 2010

69 Implementation of FTP-2 The Fast Track Program-2 (FTP-2) will be a strong driving force to achieve the power development and energy mix targets. Careful monitoring and implementation of FTP-2 is equally important as FTP-1. (2) Acceleration of development for transmission line, substations, distribution lines Complementary to power development, the development of transmission and distribution systems should also be timely implemented based on the RUPTL. The 60 to 70% of the budget for transmission line, substations, and distribution lines is borne by the national/regional budget (APBN/APBD) or PLN s budget (APLN). The remaining 30 to 40% of development budget comes from multi-/bi-lateral foreign assistance, like JICA, ADB, World Bank, etc. Securing of the annual budget for development should be the first priority of the transmission and distribution sector. The cause/s of the fire disaster of substations in Jakarta in November 2009 which seriously affected the electricity supply in the city should also be considered which points to either deterioration of transmission/distribution facilities or overload to the facilities to some extent. The collection of information such as: (i) data of distribution loss, (ii) records of accident, (iii) load factors to the facilities, and (iv) degradation level of the facilities (year of installation/rehabilitation) is required in the study for further enhancement of the facilities. (AP-2) Application of Demand Side Management (DSM) The application of demand side management is another tool for the stable supply and use of electricity which contributes to the efficient use of energy. For this, JICA facilitated a study called The Study on Energy Conservation and Efficiency Improvement in the Republic of Indonesia 7 in The study focuses on the analysis of present energy consumption structure and proposes effective measures for energy conservation and electricity demand-side management (DSM). The study also proposes action plans and the roadmap to effectively promote energy conservation. Energy efficiency (EE) is a cost-effective approach to invest in energy conservation and efficiency improvements, particularly on the end-use or demand side, where the growing demand for energy services cannot be immediately met through increasing energy supply. EE contributes to energy security, economic growth, and environmental sustainability through emissions reduction and mitigation of global GHGs. Recent changes in methodologies and approaches by the CDM Executive Board made the programmatic CDM approach suitable for EE. There is possibility of developing an EE project in Indonesia targeting different end-uses such as replacement of incandescent bulbs in office buildings and hotels in Jakarta and major cities, establishing financial facility for industry and commercial sectors, and setting performance standards for equipment and appliances. A simplified small-scale methodology could apply to such an EE project if the project achieves an annual energy savings of 60 GWh. The generated carbon credits by the project would 7 PDF files are available in JICA Library ( Republic of Indonesia March 2010

70 add supplemental revenues to the project owner while it reduces the stress on the energy supply systems and on the local and global environment. (AP-3) Revision of Tariff Table that can cover the generation cost The electricity tariff of PLN has not been revised since The revision of tariff table is one of the most important regulatory issues considering the issue of low tariff that cannot cover the generation cost: a) for sound operation of electricity supply business, which is mainly executed by PLN at the moment; and b) for formulation of attractive investment environment for private investors to the power sector. In Japan, for instance, electricity tariff is periodically evaluated by an independent third party. The total cost for power generation is periodically reviewed taking into account the necessary costs of generation, electrification and maintenance for the remote users. With such a system, a balanced tariff scheme is determined to satisfy (i) sound management of the power supply company, (ii) reasonable tariff for users, and (iii) power supply for all users (universal service). Therefore, it is recommended for Indonesia to introduce a similar third party evaluation scheme for appropriate determination of electricity tariff. The current tariff does not reflect the cost of electricity. It is necessary to explain to users the need for tariff increase in order to alleviate the critical financial status of PLN and to sustain sound development of Indonesia s power sector. (AP-4) Reduction of Subsidy As presented in Figure , all types of electricity users profit from subsidy which exert pressure on the national budget (about 2% of GDP in 2008). PLN can not operate its business without subsidy. The reduction of subsidy should be tackled through combination with other action plans such as (AP-5) Acceleration of Power Development that contributes to reduction of power generation cost and (AP-9) Regulations in revision/transformation. (AP-5) Acceleration of Power Development that contributes to reduction of power generation cost The reduction of power generation cost is one of effective measures to contribute to tariff and subsidy issues. The current average cost of PLN to generate 1 kwh of electricity is Rp. 1,271 (2008). Through the development of energy sources with low production cost, such as coal-fired steam power plant, hydropower plant or geothermal power plant, the government can possibly lower the generation cost. (AP-6) Preparation and Implementation of Roadmap for Rural Electrification The determination of the regions/areas to electrify, selection of optimum energy source for electrification, estimation of cost for electrification, and decision who to operate and maintain the power plant are the basic tasks for the smooth implementation of rural electrification. For this Republic of Indonesia March 2010

71 purpose, technical assistance for both central and local governments will be crucial in the preparation of a roadmap for rural electrification. Electrification of each target area should be implemented based on this roadmap. It was mandated by the government that rural electrification will be under the responsibility of the local government from the year Under this situation, capacity building of the local government will be necessary for the smooth implementation of rural electrification to achieve the target of both household electrification ratio and village electrification ratio. A least cost option will be adopted for the selection of energy sources. The possible candidates for energy sources are either (i) to extend the grid from PLN s supply area, or (ii) to establish isolated mini-grids from PLN s supply system (off-grid supply system). In case of off-grid supply system, there are several options such as: (i) mini-grid by micro-hydropower station, (ii) mini-grid by biomass gasification power station, (iii) mini-grid by diesel power station, (iv) installation of solar power battery charging station, and (v) individual household electrification by solar home system. As per government s policy, the application of renewable energy is the recommended source for rural electrification. However, this type of energy source requires higher initial cost for installation as compared with diesel power generation or grid extension. Therefore, financial support schemes for initial investment costs including connection are necessary to accelerate the development and promotion of rural electrification by renewable energy. The options for the operation and maintenance of power stations and distribution systems are: (i) by PLN, (ii) by rural electrification enterprise, or (iii) by village electrification cooperatives, etc. Specific pre-feasibility studies and pilot projects in some representative locations should be conducted once the rural electrification roadmap is formulated. Such pilot projects will give chances for business people to exploit their opportunities, for institutions to learn how to sustain and expand electrification services, and for those people in un-electrified villages to observe the benefits of rural electrification and help them obtain ideas and ways toward the electrification of their villages. The MEMR should take the lead in formulating the roadmap with close coordination to the relevant ministries, agencies, local governments, and NGOs. (AP-7) Close coordination between central and local government It is always the case that the development permission for the development of power sector projects in the local areas is under control of the local government despite the project s national importance. Close coordination between central and local government is prerequisite for the smooth implementation of the project. Clarification of the roles of central and local governments in developing the power sector projects and holding of coordination meetings before and during the project implementation are necessary for smooth and efficient coordination. For this, BAPPENAS should play a vital role especially during the start up period of the project. Republic of Indonesia March 2010

72 (AP-8) Promotion of renewable energy and natural gas supply infrastructure development The promotion of renewable energy development is important to: (i) achieve the target of energy mix, and (ii) to promote rural electrification by applying renewable energy sources. These are already discussed in (AP-1) Enhancement of Power Supply Capacity and (AP-6) Preparation and Implementation of Roadmap for Rural Electrification. Further increase of share for natural gas should be accelerated from the current 21% level toward the target of 30% in 2025 to achieve the national energy mix target. The fast-track development of natural gas supply infrastructures is urgently required considering the backlog during the last RPJM period ( ). (AP-9) Regulations in revision/transformation After the approval of the new electricity law Law No. 30/2009 on Electricity in the parliament, the implementing rules and regulations are being prepared by the Directorate General of Electricity and Energy Utilization (DGEEU) of the MEMR. With the new law, a considerable part of electricity development will be under the responsibility of local governments and entities other than PLN. Technical guidance from the central government will be essential to reinforce the capability of the local governments and other entities in handling electricity business. Foreign technical assistance can be considered as well when applying cutting-edge technologies to further assist such activities Priority projects for the next five years ( ) The following indicators should be set as the power sector development targets for the next five years (RPJM ) in the implementation of the action plans to address the issues in the preceding sub-section : Target Indicators for ) Additional Power Development: 30,000 MW 2) Additional Transmission Line Development: 28,000 kmc 3) Transmission Loss: Less than 10% 4) Rural Electrification: 80.4% of household electrification ratio and 98% of village electrification ratio by ) Energy Efficiency and Conservation: Energy elasticity less than 1.44 by Based on information and discussions provided by BAPPENAS during the study period. Republic of Indonesia March 2010

73 Preliminary examinations on candidate projects were made in this sub-section using available reference materials to achieve the above targets. The followings reference materials were used in the examination: 1) RUPTL (Power Development Program prepared by PLN) 2) Plan of Required Investment for Power Development, Transmission Line and Substation Development of PT PLN (Rencana Kebutuhan Investasi Proyek Transmisi/GI dan Pembangkit PT PLN (Persero) Revisi 1), hereinafter called as PLN investment plan (This document was prepared in November 2009 to estimate the required cost and to decide possible donors for the power development, transmission line and substation development for the next five years.) 3) Status of projects in Blue Book submitted from PLN to BAPPENAS 4) Candidate project list to be put into Blue Book submitted from PLN to BAPPENAS Using the above materials, candidate project lists were examined for each category consisting of: 1) Power Development 2) Transmission Line, Substation, Distribution Line Development 3) Rural Electrification (1) Power Development The prospective power development projects were examined for Java-Bali system and outside Java-Bali system (Sumatra, Kalimantan, Sulawesi, Maluku&Papua, and NTB&NTT) using the RUPTL as reference material. a) All power development projects including IPPs in Java-Bali system The power development projects including the ongoing projects in Java-Bali system shown in Table are scheduled for the period from 2010 to 2014, according to RUPTL According to the schedule on Table 4.2.8, additional 19,003 MW will be newly added to Java-Bali system during the next five years of 2010 to Of these, 11,318 MW (60%) will be developed by PLN while the rest of 7,685 MW (40%) will be by IPPs. Republic of Indonesia March 2010

74 Table Power Development Projects for for Java-Bali System Additional Installation Type of Expected Installed Developmen Scheme Capacity t /Fund source Year of Installation and Capacity (MW) MW (1) PLN Project (a) Ongoing Project 6,118 ( ) 2,890 5, PO-01 Muara Karang PLTGU 694 JBIC PO-02 Muara Tawar PLTGU 241 JBIC 241 PO-03 Priok Extension PLTGU 743 JBIC PO-04 Suralaya # PLTU 625 FTP PO-05 Labuan PLTU 600 FTP PO-06 TelukNaga/Lontar PLTU 945 FTP PO-07 Pelabuhan Ratu PLTU 1,050 FTP-1 1,050 PO-08 Indramayu PLTU 990 FTP PO-09 Rembang PLTU 630 FTP PO-10 Pacitan PLTU 630 FTP PO-11 Paiton Baru PLTU 660 FTP PO-12 Tj. Awar-awar PLTU 600 FTP PO-13 Tj Jati Baru Cilacap Baru PLTU 600 FTP (b) Planned Projects 5,200 ( ) ,000 PP-01 Upper Cisokan PS PS 1,000 IBRD , PP-02 Muara Tawar Add-On 2,3,4 PLTGU 1,200 JBIC , PP-03 Bojanegara (LNG Terminal) PLTGU 2,250 Unallocated PP-04 PLTGU Baru PLTGU 3,000 Unallocated ,500-1,500 PP-05 PLTG Baru PLTG 2,600 Unallocated ,400-1,200 - PP-06 Indramayu Baru PLTU 1,000 JICA 1,000 PP-07 PLTU Baru PLTU 5,000 Unallocated ,000 2, ,000 PP-08 Kesamben PLTA 37 Unallocated PP-09 Kalikonto-2 PLTA 62 Unallocated PP-10 Matenggeng PS PS 885 Unallocated PP-11 Grindulu PS PS 1,000 Unallocated ,000 (2) IPP Project (a) Ongoing Project 1,040 ( ) IO-01 Kamojang #4-Operasi PLTP IO-02 Wayang Windu PLTP IO-03 Cikarang Listrindo PLTG IO-04 Cirebon PLTU IO-05 Bali Utara/Celukan Bawang PLTU (b) Planned Projects 6,645 ( ) IP-01 Banten PLTU IP-02 Madura PLTU IP-03 Bali Timur (Infrastruktur) PLTU IP-04 Sumatera Mulut Tambang PLTU 3, ,800 1,200 - IP-05 PLTU Jawa Tengah (InfrastruktPLTU 2, ,000 1, IP-06 Paiton #3-4 Exp (IPP) PLTU IP-07 Tanjung Jati B Exp (IPP) PLTU 1, IP-08 PLTU Jabar (Ex. Tj Jati A) PLTU 1, IP-09 Panas Bumi PLTP 2, IP-10 Rajamandala PLTA IP-11 Jatigede PLTA Total Installation 60 3,150 5,348 2,620 3,835 3,375 3,825 1,040 1,970 1, Total Installation ,003 by PLN 11,318 by IPP 7,685 Note: PLTU: Coal fired steam power plant, PLTP: Geothermal power plant, PLTA: Hydropower plant, PLTG: Gas fired power plant, PLTGU: Gas combined cycle power plant, PS: Pumped storage power plant Source: Prepared by the JICA Study Team based on RUPTL (PLN) Of the 11,318 MW by PLN, 7,330 MW (64%) will be developed under the Fast Track Program-1 (FTP-1) whose development is ongoing. According to the original schedule, three power stations with total capacity of 1,890 MW will be put into the system by 2009 under the FTP-1. The rest of the seven power stations with total capacity of 5,440 MW will be completed during the period from 2010 to There are four gas combined cycle power stations scheduled, namely Muara Karang (694 MW), Muara Tawar (241 MW), Priok Extension (743 MW) and Muara Tawar Add-On 2, 3, 4 (1,200 MW) with total capacity of 2,878 MW. Of these, 1,878 MW will be put into the system during the period from 2010 to These projects are under/scheduled for construction with financial assistance from Japan Bank for International Cooperation (JBIC). The Upper Cisokan pumped storage power plant is schedule to be funded by the World Bank. The project is in the preparation stage of consultant procurement for design review and construction supervision. Project No. PP-07 PLTU Baru (new development of coal fired steam power plant, 3,000 MW) is scheduled to be put into the system during without expected financial resources. It is Republic of Indonesia March 2010

75 urgently required to scout for possible donors to fund this project, or to find possible investors who will develop the project as an IPP scheme. As for geothermal power development, in addition to the scheduled PLN projects in Table 4.2.8, the following five projects are scheduled to be implemented by PLN instead of IPPs. 1) Gunung Tangkuban Perahu 110 MW 2) Kamojang 100 MW 3) Ijen 30 MW 4) Wilis/Ngebel 110 MW 5) Iyang Argopuro 275 MW b) Candidate project list for external loan in Java-Bali system Excluding FTP-1 and IPP projects among those described in the preceding section, the following projects shown in Table will be the candidates for external loans with their possible disbursement schedule and expected donors. The data in Table are derived from PLN investment program which is mostly based on RUPTL with minor adjustment made based on coordination result with donors. There are still several projects without possible donors. Further discussions between donors and government officers (ex. PLN) will be required, such as discussion during fact finding or appraisal missions. No. Table Candidate Project List for External Loans (Java-Bali system) Project Name Type of Power Plant Expected Installed Capacity Possbile Donors year of operation Disbursement Schedule (Mil. USD) Disbursem ent (Mil. USD) Total Investment (Mil. USD) after Total JB-11 Indramayu Baru Coal fired 2,000 JICA ,313 2,500 JB-13 Muara Karang Repowering Gas combined cycle 694 JBIC 2009, JB-14 Priok Extension Gas combined cycle 743 JBIC 2009, JB-15 Muara Tawar Blok #5 Gas combined cycle 241 JBIC JB-16 Muara Tawar Add-On 2,3,4 Gas combined cycle 1,200 Credit Export 2011, ,020 1,020 JB-17 LNG Bojonegara Gas combined cycle 2, ,913 JB-18 PLTGU Baru Gas combined cycle 3, , , ,188 JB-19 PLTG Baru Gss fired 3, , , ,160 JB-20 Kesamben Hydro JB-21 Kalikonto Hydro JB-22 Upper Cisokan Pumped StoragePumped Storage 1,000 IBRD JB-23 Matenggeng PS Pumped Storage JB-24 Grindulu PS Pumped Storage 1, JB-26 Ijen Geothermal 110 Multi/bilateral JB-27 Iyang Argopuro Geothermal 275 Multi/bilateral 2017, JB-28 Kamojang Geothermal 100 JICA JB-29 Wilis/Ngebel Geothermal 165 Multi/bilateral Source: PLN 18,112 c) All the power development projects including IPPs outside Java-Bali system The total number of projects outside the Java-Bali system consisting of Sumatra, Kalimantan, Sulawesi, Maluku&Papua, and NTT&NTB are too many to list up which include many isolated systems mainly supplied by diesel power generation. Therefore, only summary of development projects by PLN and IPPs are shown in the following table by regions. Republic of Indonesia March 2010

76 Table Power Development Projects Summary (outside Java-Bali system) Region by PLN (MW) by IPP (MW) Total (MW) Sumatra 3,350 2,102 5,452 Kalimantan 1, ,947 Sulawesi 1, ,835 Maluku & Papua NTB & NTT Total 6,450 3,589 10,039 Source: Prepared by using RUPTL d) Candidate project list for external loan outside the Java-Bali system The power development projects outside the Java-Bali system which will be candidates for external loan for the period are shown in Table below. The required fund, disbursement schedule and expected donors are shown in the table. The data are derived from PLN investment program which is mostly based on RUPTL but with minor adjustment based on coordination result with donors. The criteria for selecting the above projects are: (1) projects whose donors have already been decided; and (2) projects with required investment cost of more than USD 10 million. There are still several projects without possible donors. Further discussion between donors and government officers (ex. PLN) will be required, such as discussion during fact finding or appraisal missions. Republic of Indonesia March 2010

77 Table Candidate Project List for External Loans (outside Java-Bali system) No. Project Name Region Type of Power Plant Expected Installed Capacity Possible Donors year of operation Disbursement Schedule (Mil. USD) Disbursem ent (Mil. USD) Total Investment (Mil. USD) after Total OJB-000 Genyem Maluku & Papua Hydro 20 ADB 2011, OJB-001 Asahan III Sumatra Hydro 174 JICA OJB-002 Peusangan Sumatra Hydro 86 JICA OJB-003 Bakaru II Sulawesi Hydro 126 JICA indication 2015, OJB-004 Bone I Sulawesi Hydro ? OJB-005 Bone II Sulawesi Hydro ? OJB-006 Bonto Batu Sulawesi Hydro OJB-007 Isal II Maluku & Papua Hydro OJB-008 Kusan Kalimantan Hydro OJB-009 Poko Sulawesi Hydro OJB-012 Bacan Maluku & Papua Diesel 1 Belgian Loan OJB-013 Kuala Enok Sumatra Diesel 2 Belgian Loan OJB-014 Sanggeng (Manokwari) Maluku & Papua Diesel 3 Belgian Loan OJB-015 Sofifi Maluku & Papua Diesel 2 Belgian Loan OJB-016 Timika Maluku & Papua Diesel 3 Belgian Loan OJB-017 Tobello Maluku & Papua Diesel 3 Belgian Loan OJB-074 Luwuk Turbine Gas Sulawesi Gas fired , OJB-075 New PLTG Kalbar Kalimantan Gas fired , OJB-076 New PLTG Kaltim Kalimantan Gas fired OJB-077 New Sumut Sumatra Gas fired OJB-079 Keramasan Sumatra Gas combined cycle 86 JICA OJB-081 Lhokseumawe Sumatra Gas combined cycle OJB-082 Muara Teweh Kalimantan Gas combined cycle OJB-083 Lobong Sulawesi OJB-084 Mangango? OJB-085 Merasap Kalimantan OJB-086 Ndungga NTB & NTT OJB-087 Prafi (Manokwari) Maluku & Papua OJB-088 Santong NTB & NTT OJB-106 Kombemur (Fak-Fak) Maluku & Papua OJB-129 Hululais #1,2 Sumatra OJB-130 Lahendong IV Sulawesi OJB-131 Tulehu Maluku & Papua OJB-132 Ulumbu NTB & NTT OJB-134 Lahendong III Sulawesi OJB-135 Lumut Balai Sumatra OJB-136 Sungai Penuh Sumatra OJB-137 Ulubelu #3,4 Sumatra OJB-138 Mataloko NTB & NTT OJB-139 Sembalun NTB & NTT OJB-140 Ulubelu #1,2 Sumatra OJB-142 Bora Sulawesi OJB-143 Hululais #3 Sumatra OJB-144 Huu NTB & NTT OJB-145 Jaboi Sumatra OJB-146 Kotamobagu Sulawesi OJB-147 Lahendong Optimasi Sulawesi OJB-148 Lahendong V Sulawesi OJB-149 Lainea Sulawesi OJB-151 Merana Sulawesi OJB-152 Seulawah Sumatra OJB-154 Wai Sano NTB & NTT OJB-155 Lombok NTB & NTT OJB-166 New PLTU (Sumbagut) Sumatra OJB-209 Takalar Sulawesi Source: PLN Based on the above data, about 29,000 MW of power development projects will be executed in the next five years with about 18,000 MW to be developed by PLN and about 11,000 MW by IPPs. Out of the PLN 18,000 MW development, 10,000 MW will be developed by FTP-1 while the remaining 8,000 MW will be developed using external loan. (2) Transmission Line, Substations, and Distribution Line Development Based on the PLN investment program , the necessary development projects were examined for both Java-Bali system and outside Java-Bali system (Sumatra, Kalimantan, Sulawesi, Maluku&Papua, and NTB&NTT). The succeeding three figures below show fund arrangements for projects in the Java-Bali system. Republic of Indonesia March 2010

78 Table Required Investment on Transmission Line in Java-Bali system Mil. USD Fund source Total % ADB % APBN % APLN % IBRD % JICA % JBIC % Credit Export % Acceleration % Unallocated % Total , % Table Required Investment on Substation in Java-Bali system Mil. USD Fund source Total % ADB % APBN , % APLN % IBRD % JICA % Credit Export % Acceleration % Unallocated % Total , % Table Required Investment on Distribution Line in Java-Bali system Mil. USD Fund source Total % APLN , % ADB % Total , % As indicated in the above tables, the construction cost for transmission lines, substations and distribution lines are mostly allocated from the national budget (APBN) or PLN budget (APLN). Funds allocated from ADB, IBRD, JICA and JBIC are also counted. However, these schemes are mostly by prepared as supplementary component for the power development schemes with less than USD 500 million in budget. Large scale projects, such as the Java-Sumatra submarine transmission line, will need separate discussions between government officers and donors for formulation of individual sub-projects. The same idea is applied for projects outside the Java-Bali system as shown in Tables to 17. Republic of Indonesia March 2010

79 Table Required Investment on Transmission Line outside Java-Bali system Mil. USD Fund source Total % APBN , % APLN , % Credit Export indication % IBRD indication % ADB indication % Unallocated % Total , % Table Required Investment on Substations outside Java-Bali system Mil. USD Fund source Total % APBN % APLN % Credit Export indication % IBRD indication % ADB indication % Unallocated % Total , % Table Required Investment on Distribution Line outside Java-Bali system Mil. USD Fund source Total % APLN , % APBN % ADB % IBRD % Loan from Korea % Total , % (3) Rural Electrification In RPJM , the rural electrification target is set as follows: % of household electrification ratio by % of village electrification by 2014 About Rp. 1.5 trillion were allocated for rural electrification program, mainly for off-grid areas, during the last five years. The same amount will be allocated for the next five years. Such fund allocation will be borne by the national budget (APBN). From the latest information from BAPPENAS (as of January 2010), the rural electrification programs will be under the responsibility of local governments. Fund sources for rural electrification programs will come from the special allocation fund (DAK) with a total amount of Rp. 10 trillion in five years. Republic of Indonesia March 2010

80 4.2.6 Candidate projects for Blue Book The current status of candidate project list and selection criteria are presented in this subsection. (1) The past Blue Book candidate list Two Blue Books were prepared during the last RPJM period, i.e., Blue Book (original) and Blue Book (2008 revision). Of the two Blue Books, the power sector related schemes and their status are summarized below: No Table Blue Book (original and 2008 revision) Project Title E/S for Java-Sumatra Interconnection 500 kv Line HVDC Construction for Java-Sumatra Interconnection 500 kv Line (HVDC) Phase-1 Muara Tawar Add on Block 2,3,4,CCPP ( MW) Investment Required (Million USD) Counterpart Loan Funding Fund Source Indication 40 - JICA Procurement Stage 2, JICA Appraisal stage KE Procurement EPC Status 4 Java-Bali Submarine Cable 150 kv Circuit 3& KE Waiting for Ministry of Finance Approval 5 Rehabilitation and Modernization of Paiton SPP o Contract signed JBIC 1&2 (2x400 MW) o Waiting for approval 6 Rehabilitation and Modernization of Saguling HEPP o Contract signed JBIC (4x178 MW) o Contract is waiting for L/A 7 Enterprise Resource Planning (ERP) Outside Java- Bali 30 IBRD Procurement stage 8 Lahendong IV GEOPP (1x20 MW) ADB EPC stage, waiting for ex-hepp Poigar fund 9 Lombok Steam Coal Power Plant (2x25 MW) Korea Waiting for appraisal 10 Parit Baru Steam Coal Power Plant (2x50 MW) Cina Retender 11 Takalar Steam Coal Power Plant (2x115 MW) in South Sulawesi Java-Bali Distribution Performance Improvement ADB 13 Scattered Transmission and Substation in Indonesia. Funding source is divided into 2 : 1. KE Fund : For strengthening Jakarta 2. IBRD Fund : For InterBus Transformer (IBT) Java and Sumatera 500 IBRD/KE o Bargained price is higher than HPS o Need decision for other fund source instead of Spanish loan o Has been appraissed o Waiting for L/A KE Fund Status o Recommendation from BAPPENAS o Waiting for Ministry of Finance Approval IBRD fund status o Arranging tender document o Waiting for appraisal 14 Java-Bali Crossing Interconnection 500kV ADB 15 Upper Cisokan Pumped Storage HEPP (1000 MW) IBRD 16 Sembalun GEOPP, Lombok (2x10 MW) JICA 17 Bakaru II Hydro Electric Power Plant (HEPP) (2x63 MW) 18 Kusan Hydro Electric Power Plant (HEPP) 65 MW JICA TOTAL FS arragement and document tender by ADB (in progress) o LARAP in progress o Procurement for consultant o Waiting for WKP tender o F/S is in progress JICA JICA has intention to conduct SAPROF II 5, Republic of Indonesia March 2010 o o LARAP arrangement is on progress Waiting for JICA appraisal KE: Kredit Expor (Credit Export), WKP: Wilayah Kerja Pertambangan (Mining Working Area), LARAP (Land Acquisition and Resettlement Action Plan) Source: PLN

81 (2) Blue Book Candidate List for At the beginning of December 2009, PLN sent a letter to BAPPENAS showing the power sector candidate project list for Blue Book. There are 11 projects for Project Assistance and seven projects for Technical Assistance in the list as shown below. Table Candidate Project List for Blue Book (Project Assistance) Capacity Investment Required Counterpart Potential No Project Title Total Loan (MW) Funding Lender (Mil. US$) (Mil. US$) (Mil. US$) 1 Steam Coal Fired Power Plant Indramayu 2,000 2,890 2, JICA Baru 2 Hydro Electric Power Plant Merangin JICA 3 Geothermal Power Plant Hululais 1& JICA/ADB 4 Geothermal Power Plant Kotamubagu 1, 2, JICA/ADB &4 5 Geothermal Power Plant Sungai Penuh 1 & JICA/ADB 6 Geothermal Power Plant Tulehu JICA 7 Geothermal Power Plant Mataloko JICA 8 HVDC Java Sumatra 2,392 2, JICA 9 Interconnection of West Kalimantan-Serawak ADB 10 Scattered Transmission Lines & Substations in Indonesia 11 Electrification Development Program in Sumatra TOTAL 1, ADB Korea 2,675 7,452 6, Source: PLN, BAPPENAS Republic of Indonesia March 2010

82 Table Candidate Project List for Blue Book (Technical Assistance) No Project Title Province Capacity (MW) Remarks 1 Geothermal Power Plant Hulu lais Bengkulu 110 WKP Pertamina 2 Geothermal Power Plant Kotamubagu Sulawesi Utara 80 WKP Pertamina 3 Geothermal Power Plant Sungai Jambi 110 WKP Pertamina Penuh 4 Geothermal Power Plant Sembalun NTB 20 WKP PLN 5 Geothermal Power Plant Ulumbu NTT WKP PLN, additional 6 Master Plan Study for Scattered Geothermal in Indonesia 7 Detailed Master Plan Study for Greater Jakarta Source: PLN, BAPPENAS DKI Jakarta WKP: Wilayah Kerja Pertambangan (Mining Work Area) (3) Evaluation of Candidate Project List for Blue Book Below are the speculations and recommendations based on the proposed list submitted by PLN: (a) Contributions to power deficit solutions and lowering of generation cost About 30,000 MW of power development projects will be executed during the next five years from 2010 to About 75% of these projects will utilize coal fired steam power plant. The accelerated development of coal-fired steam power plant is expected to resolve the chronic power deficit in the country, especially in the Java-Bali system. In addition, coal fired power plants can generate electricity at lower cost compared with diesel power plants, which may contribute to the lowering of power generation cost. (b) Need of Renewable Energy development acceleration On the other hand, the accelerated coal fired power plant installation will make its share to be around 60% of the total installed capacity in Indonesia, which is contrary to the energy mix policy to promote more renewable energy. Therefore, the accelerated development of renewable energy sources such as hydropower and geothermal will be prerequisite to achieve the target of energy mix in 2025 stipulated as a national policy. Steady implementation of feasibility studies and detailed designs for geothermal and hydropower projects should be prioritized to confirm the viability and promote the accelerated development of these projects. In addition, sufficient coordination of development concessions on potential geothermal and hydro power projects is the key issue for smooth implementation of the power Republic of Indonesia March 2010

83 potential. The central government should duly coordinate with the local governments during the investigation, study, design and construction stages of the projects. It is recommended to implement those projects with sufficient maturity even before their original implementation schedule to further accelerate the renewable energy development. (c) Need of application of clean coal technologies (CCTs) The development of coal-fired power plant is in full swing by the Fast Track Program-1. However, coal fired power plants have the nature of emitting more greenhouse gases compared with other power sources. Thus, consideration should be carefully made on the application of clean coal technology for the development and diffusion of coal fired power plant to reduce the environmental burden. As mentioned in the preceding subsection, the application of CCTs is a must for the projects under Fast Track Program-2 (FTP-2). Likewise, the application of CCTs in the rehabilitation/improvement of the existing coal fired power plants should also be considered and implemented. Considering the above points and from the view point of (b) Need of Renewable Energy development acceleration above, the following projects should be added into the candidate list for Blue Book and should be listed up for timely implementation. Study and construction of: (i) Merangin Hydropower Project in Sumatra (Jambi) (ii) Bonto Batu Hydropower Project in Sulawesi (iii) Malea Hydropower project in Sulawesi (iv) Bakaru Rehabilitation and Bakaru II Hydropower project in Sulawesi (v) Isal-2 Hydropower project in Maluku (Seram) (vi) Peusangan-4 Hydropower project in NAD (vii) Grindulu Pumped Storage Power Project (viii) Matenggeng Pumped Storage Power Project (ix) Upper Cisokan Pumped Storage Power Project (x) Pugar Sea Water Pumped Storage Power Project (xi) Karaha Geothermal Project (xii) Ulubelu 3,4 Geothermal Project (xiii) Lahendong 5,6 Geothermal Project (xiv) Lumut Balai 3,4 Geothermal Project (xv) Kamojang 5 Geothermal Project From the view point of (c) Need of application of clean coal technology above, the followings should be implemented. (xvi) Study and Construction of Indramayu Coal-fired Steam Power Plant in Java (xvii) Technical assistance for rehabilitation/improvement of existing coal fired steam power plant by applying Clean Coal Technologies (CCTs) Republic of Indonesia March 2010

84 To further accelerate transmission line development: Study and Construction of (xviii)upgrading Transmission Capacity of 500 kv Line in West Java (xix) Java-Sumatra Interconnection Transmission Line Project II & III (xx) Malay-Sumatra Interconnection Transmission Line Project To further accelerate environment friendliness and efficient energy use, (xxi) Technical assistance related to energy efficiency and conservation To further accelerate achievement of target electrification ratio, (xxii) Technical assistance for rural electrification master plan (4) Selection criteria for candidate Blue Book projects The following procedures will be taken for the selection of candidate project list in the Blue Book Figure Flow of Selection of Candidate Projects for Blue Book Project Assistance (PA) from BB Technical Assistance (TA) from BB New PA/TA Proposal from PLN New PA/TA Proposal from MEMR Additional PA/TA scheme to achieve the target indicator Selection Criteria Candidate Project List for BB : 6. : Republic of Indonesia March 2010

85 Candidate projects will be selected using the above flow, and the selection criteria will be as follows: Consistent with national development plan (RPJMN, Renstra, RUKN, RUPTL) Project Cost > 10 million USD (Suitable size for external loan) Readiness/Maturity of the project (feasibility study or detailed design completed) Committed by possible donors Project EIRR > 12% To Further Accelerate: Energy mix target Renewable Energy Development (Hydro and Geothermal) Lowering of generation cost Achievement of key performance indicators of the sector Energy efficiency and conservation Application of: Environmental friendly technologies Cutting-edge technologies Technical Assistance to support above objectives Though the detailed information on the candidate projects are not fully available at the moment, a preliminary evaluation of the candidate projects for Blue Book are given in Table in the next page. Further evaluation should be made after obtaining sufficient project information to screen the candidate projects by criteria. Republic of Indonesia March 2010

86 Table Candidate Project List for Blue Book and their preliminary evaluation To Further Accelerate: Application of: No. TA/PA Consistent with national development plan (RPJMN, Renstra, RUKN, RUPTL) Project Cost > 10 million USD 1 PA Steam Coal Fired Power Plant Indramayu Baru o o o o o o o o o o o 2 PA Merangin Hydropower Project in Sumatra (Jambi) o o o o o o o o o o 3 PA Geothermal Power Plant Hululais 1&2 o o o o o o o o 4 PA Geothermal Power Plant Kotamubagu 1, 2, 3 &4 o o o o o o o o 5 PA Geothermal Power Plant Sungai Penuh 1 & 2 o o o o o o o o 6 PA Geothermal Power Plant Tulehu o o o o o o o o 7 PA Geothermal Power Plant Mataloko o o o o o o o o 8 PA HVDC Java Sumatra o o o o 9 PA Interconnection of West Kalimantan-Serawak o o o 10 PA Scattered Transmission Lines & Substations in Indonesia o o o 11 PA Electrification Development Program in Sumatra o o o 13 TA Geothermal Power Plant Hulu lais o o o o o o o 14 TA Geothermal Power Plant Kotamubagu o o o o o o o 15 TA Geothermal Power Plant Sungai Penuh o o o o o o o 16 TA Geothermal Power Plant Sembalun o o o o o o o 17 TA Geothermal Power Plant Ulumbu o o o o o o o 18 TA Master Plan Study for Scattered Geothermal in Indonesia o o o o o o o 19 TA Detailed Master Plan Study for Greater Jakarta o 20 TA/PA Malea Hydropower project in Sulawesi o o o o o o 21 TA/PA Peusangan-4 Hydropower project in NAD o o o o o o 22 TA/PA Bonto Batu Hydropower Project in Sulawesi o o o o o o 23 TA/PA Readiness/Maturity of the project (feasibility study or detailed design completed) Bakaru Rehabilitation and Bakaru II Hydropower project in Sulawesi o o o o o o 24 TA/PA Isal-2 Hydropower project in Maluku (Seram) o o o o o o 25 TA/PA Grindulu Pumped Storage Power Project o o o o o 26 TA/PA Matenggeng Pumped Storage Power Project o o o o o 27 TA/PA Pugar Sea Water Pumped Storage Power Project o o o o o 28 TA/PA Karaha Geothermal Project o o o o o o 29 TA/PA Ulubelu 3,4 Geothermal Project o o o o o o 30 TA/PA Lahendong 5,6 Geothermal Project o o o o o o 31 TA/PA Lumut Balai 3,4 Geothermal Project o o o o o o 32 TA/PA Kamojang 5 Geothermal Project o o o o o o 33 TA 34 PA 35 PA 36 PA 37 TA 38 TA o Criteria Candidate Project Technical assistance for rehabilitation/improvement of existing coal fired steam power plant by applying Clean Coal Technologies (CCTs) Upgrading Transmission Capacity of 500 kv Line in o o o o West Java o o o Java-Sumatra Interconnection Transmission Line Project II & III o o o o Project Malay-Sumatra Interconnection Transmission Line o o o o Technical assistance related to energy efficiency and conservation o o o Technical assistance for rural electrification master plan o o : Candidate project which may satisify the criteria Committed by possible donors Project EIRR > 12% Energy mix target Renewable Energy Development (Hydro and Geothermal) Lowering of generation cost Achievement of key performance indicators of the sector Energy efficiency and conservation Environmental friendly technologies Cutting-edge technologies Supportive Technical Assistance Status Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) Proposed from PLN to BAPEPNAS (Dec. 2009) : Information not available / Candidate project which may not satisfy the criteria (Blamk) Source: Prepared by JICA Study Team Republic of Indonesia March 2010

87 4.3 Water Supply and Sewerage Sector Current Development Program (1) Water Supply and Sewerage The following three programs consisting of: a) program for promoting community empowerment; b) program for developing institutions; and c) program for improving management of drinking water and waste water are being implemented in RPJMN ) Community Empowerment The community empowerment program aims to enhance the community awareness on the importance of clean drinking water and proper management of waste water. This is initiated through improvement of the quality of life and productivity of human resources considering the following targets: a) increased awareness of communities on the importance of behavioral pattern that is consistent with clean and healthy living; and b) increased participation of communities in the development and management of drinking water and waste water. Consequently, the following activities are being carried out: 1. Execution of public campaigns, mediations and facilitation with the general public on the importance of clean and healthy ways of living; 2. Increasing the role of schools in supporting clean and healthy ways of living; 3. Presentation of proper examples and promoting the role of the communities in the conservation of raw water sources; 4. Promotion of community participation in improving the quality of the environment; 5. Conservation of local cultures and knowledge that support conservation and maintenance of raw water quality; 6. Promotion reward and punishment culture in community participation for enhancing the quality of the environment; 7. Promotion of charity funds and NGOs; 8. Increasing of community capacity on the basis of the demand driven approach, that is participatory, based on informed choice, pro-poor, gender equality, education and selffinancing; and 9. Involvement of local communities during the initial design, construction and operation and maintenance (O&M) of the facilities, as well as in the rehabilitation of areas that have been affected by natural disasters. 2) Institutional Development Institutional development is aimed at reforming the laws and regulations and promoting institutions that are related to the development of drinking water and waste water in the context Republic of Indonesia March 2010

88 of realizing an effective institutional framework and administration system. The following main objectives will be pursued accordingly: 1. To promote coordination and cooperation among activities and among regions in the development of drinking water and waste water; 2. To promulgate law and regulations on public-private partnership in the development of drinking water and waste water; 3. To enhance the role of private enterprises in the development and management of drinking water and waste water; 4. To avail of inexpensive and sustainable sources of financing; 5. To complete the revision of law and regulations on Regional Government Owned Enterprises (BUMD) engaged in the development and management of drinking water and sewerage; and 6. To restore the performance of institutions that manage drinking water and waste water services in the regions affected by natural disaster. In order to attain the above targets, the following activities are being carried out: 1. Formulation of presidential regulation on inter-regional cooperation (regionalization) in the development and management of drinking water and sewerage; 2. Formulation of presidential regulation on cooperation between the BUMN/BUMD and private enterprises; 3. Improvement of cooperation between the BUMDs and private enterprises that is mutually beneficial, accountable and transparent; 4. Promotion of water supply and sewerage fund; 5. Formulation of presidential regulation on the issuance of bonds by the BUMDs; and 6. Provision of technical assistance to institutions that manage drinking water and sewerage services in regions affected by natural disaster. 3) Improvement in Management Drinking Water and Sewerage Services The program for improving the management of drinking water and sewerage services is aimed at: a) expanding the coverage of drinking water and waste water services that are undertaken by the BUMDs; b) enhancing the performance of the BUMDs that manage drinking water and sewerage services to achieve unqualified audit opinions; and c) expanding of coverage of drinking water and sewerage services directly managed by the local communities. These shall be performed in an optimal, efficient and continuous manner. Thus, the following activities are being carried out, accordingly. 1. Restructuring the management of state-owned water supply and wastewater treatment firms, PDAM and PDAL, respectively; 2. Increasing the total number of PDAMs and PDALs with good performance in metropolitan and large cities; 3. Enhancement of the capacity of PDAMs and PDALs through competence tests, Republic of Indonesia March 2010

89 education and training and optimizing the ratio of personnel serving the total number of customers; 4. Revision of regulations on structure and determination of tariffs; 5. Reduction of leakage by replacing defective pipelines, enforcement of law against illegal connections, and enhancement of efficiency of bill collections; 6. Increasing operation and maintenance (O&M) activities; 7. Improvement of O&M activities; 8. Rehabilitation of the existing drinking water supply and sewerage systems; 9. Promotion of involvement of communities in the construction and management of drinking water and sewerage facilities; 10. Expansion of community-based drinking water and sewerage services; 11. Development of centralized sewerage system at metropolitan and large cities; 12. Provision of drinking water and sewerage infrastructures for low income housing areas; 13. Development of sludge and drinking water processing technology; 14. Restructuring of the debts of PDAMs and PDALs, specifically those obtained from foreign loans through Subsidiary Loan Agreements (SLA); and 15. Repair of drinking water and sewerage infrastructure and facilities that have been destroyed and construction of such infrastructure in new housing areas in regions affected by natural disaster. (2) Solid Waste and Drainage Management The activities for achieving the targets and pursuing policy directions for solid waste management and drainage are classified into three programs; namely, 1) program for community empowerment; 2) program for developing institutions; and 3) program for enhancing the performance of personnel managing waste and drainage facilities. 1) Community Empowerment The program for community empowerment is aimed at enhancing the community awareness in resolving solid waste and drainage problems especially on the reduction of dumping solid wastes that contaminate rivers and obstruct canals and drainage outlets. It also intends to promote involvement of communities in dealing with waste and drainage issues. The activities that will be carried out to realize the above objectives include: 1. Execution of public awareness campaigns on the 3Rs principle (Reduce, Reuse, and Recycle); 2. Development of community-based recycling centers in metropolitan and large cities; 3. Socialization of the structure for financing solutions to solve solid waste and drainage problems; 4. Expansion of the capacity of individual garbage collectors in metropolitan and large cities; Republic of Indonesia March 2010

90 5. Development of community-based vermin compost and promotion of composting activities in large and medium-sized cities; 6. Preparation and execution of models for the development of small-scale organic agricultural products as an effort to improve the compost market; 7. Execution of public awareness campaigns on the importance of drainage outlets in order to reduce the occurrence of inundations in metropolitan, large and medium-sized cities; 8. Initiation of community-based activities for the maintenance and normalization of drainage outlets in slum areas of metropolitan, large and medium-sized cities; 9. Involvement of communities in the initial planning, design, construction as well as in the O&M activities, particularly in regions affected by natural disaster in the context of rehabilitation activities. 2) Institutional Development Institutional development program is aimed at realizing an institutional system that is effective, accountable and transparent. It necessitates the existence of a regulatory framework on the relationship between government and private enterprises involving in the management of solid wastes and drainage matters; creation of new funding sources for resolving wastes and drainage concerns, improvement of the quality of coordination; and promoting cooperation among regions in dealing with solid wastes and drainage issues. The main activities that will be carried out for realizing such aims include the following: 1. Review and revision of laws and regulations that pertain to wastes and drainage matters; 2. Formulation of the academic concepts for drafting laws related to solid wastes; 3. Formulation of policies, strategies, and action plans to address solid waste problems on a national scale; 4. Execution of projects to serve as models of regional institutions taken to handle wastes and drainage services; 5. Enhancement of the quality of human resources through education and training; 6. Preparation and execution of the model project related to management of solid wastes through cooperation of the government and private enterprises; and 7. Provision of technical assistance to institutions managing the waste and drainage services in the disaster affected region. 3) Improvement of Performance in Management of Solid Waste and Drainage The program for improving the performance management of wastes and drainage is aimed at realizing the aforementioned targets in an efficient, effective, beneficial and environment friendly manner. This will consequently result in increasing the coverage of waste services, reducing the extent of inundated areas, promoting use of appropriate technology and enhancing the performance of those managing wastes and drainage services. The main activities include the following: Republic of Indonesia March 2010

91 1. Restructuring and enhancement of business professionalism of the regional government owned enterprise engaged in sanitation (PD Kebersihan) and the regional government office responsible for sanitary matters (Dinas Kebersihan); 2. Enhancement of human resources through education and training of personnel in the use and operation of necessary apparatus and equipment at institutions that deal with solid waste and drainage; 3. Increasing the quantity of solid waste to be transported to final disposal site and improvement of management for solid waste disposal site; 4. Promotion of separation of organic and non-organic wastes; 5. Application of advanced technology to reduce solid waste volume in metropolitan cities; 6. Enhancement of the quality of management of final disposal sites based on the standards on sanitary landfill system for large cities; 7. Application of recommendations from the feasibility study for the utilization of the Waste to Energy (WTE) incinerator in waste processing; 8. Enhancement of capacity building of institutions that handle the construction and maintenance of drainage facilities; 9. Enforcement of laws against illegal housing settlements that occupy lands intended for drainage networks; 10. Increase and normalization of drainage outlets; 11. Construction of primary and secondary drainage networks for large cities; 12. Enhancement of O&M activities to primary and secondary drainage networks; 13. Promotion of cooperation between the government and private enterprises, through contract management, leasing, BOT and BOO, for the management of wastes and drainage matters; 14. Development of appropriate technology on waste and drainage; and 15. Rehabilitation of the infrastructure and facilities of waste handling and the drainage systems that have been destroyed and construction of additional facilities in various new settlement areas affected by natural disaster Progress of Development (1) Water Supply The access rate to drinking water source including household water connection, public standpipe, borehole, dug well, spring, rainwater collection, and bottled, are summarized as follows: Republic of Indonesia March 2010

92 Tabel Access Rate to Water Supply Service Type of WS Year 2001 (%) Year 2004 (%) Year 2007 (%) Rural Urban Nation Rural Urban Nation Rural Urban Nation Piped WS Target of RPJMN in Safe Non-Piped WS * Unsafe Non-Piped WS * Others Source : Susenas, BPS, various years Note : *1/Safe non-piped drinking water sources consisting of protected dug wells, springs, and rain water *2/Unsafe non-piped drinking water sources consisting of pump, unprotedted dug wells, springs, rain water and so on The targeted access rate to the piped system in the RPJMN was 30% in rural areas and 66% in urban areas. However, the achieved rates remain lower than target rates due to insufficient funds for expansion of water supply facilities in urban areas and problems on identifying the proper rural areas by the local governments. The improvement of PDAM is a key issue for raising the access rates especially in urban areas. Moreover, those for the non-piped system with protection of water source were reduced during this 5-year plan, in spite of the Indonesian government s efforts in increasing the water supply capacity and served population as shown in Table Table Development of Piped Water Supply Facilities Description Piped Drinking Water Supply Population Served (litter/s) (Million Person) RPJMN/RENSTRA , Achievement , , , , Achievement by , Difference to Target 10, Plan in , Source: 4 th Evaluation Report for RPJM , 2009 The incremental increase of population served with piped drinking water supply during the 4-year period of is about 11 million. However, the access rate to water supply has been lower than the population growth rate during this period. Comparing with other developing countries in Asia in terms of access rate, Figure shows that Indonesia s progress rate in the provision of water supply facilities for the past 16 years ( ) is only 10%. Piped system has decreased the share of access rate year by year, due to poor management capacity. Republic of Indonesia March 2010

93 100 Access Rate (%) Japan India China Viet Nam Thailand Philippines Malaysia Cambodia Indonesia Source: United Nations Millennium Development Goals Indicators (online database, accessed on 8 August 2008). ESCAP Statistical Yearbook for Asia and the Pacific 2008; Figure Low Development Progress in Water Supply Sector Year The soundness of management of PDAMs is evaluated by BPP-SPAM, a consultative body for water supply at the national level which was established under the law of PP 16/2005 on the Development of Water Supply System. BPP-SPAM is a ministerial body established by and responsible to the Minister of Public Works. In 2007, the evaluation result shown in Table indicates Sound ( Sehat ) at 24% (80/335), Unsound ( Kurang Sehat ) at 35% (116/335), and Poor ( Sakit ) at 41% (139/335). The 255 PDAMs with Kurang Sehat and Sakit evaluation ratings are assessed as having insufficient O&M functions. Table Soundness of Management of PDAMs Soundness of Management * 2009* Sound (Sehat) Unsound (Kurang Sehat) Poor (Sakit) Note: Figures with symbol of * means target. Source: The water dialogues, Indonesia On the other hand, National Audit Agency (BPKP) evaluated PDAM in 2006 and 2007, and reported the number of Sound PDAM is 53 in 2006 and 49 in 2007 out of checked PDAM of 205. During the current RPJMN, PDAMs evaluated as Sehat increased from 38 (11%) in 2004 to 80 (24%) bodies in However, the remaining 76% of PDAMs needs improvement of management capacity. There are several indicators set to measure the performance of PDAM in Direktri Kinerja PDAM Tahun 2007 issued by BPP-SPAM. The applied indicators are as follows: Republic of Indonesia March 2010

94 A. Financial 1. Operating ratio (cost per income) 2. Debt to total assets 3. Income against total debt 4. Number of days for collection of revenue after issuing invoice to customer B. Management 1. Consumed water m 3 /pel/bln 2. Customer Structure - Industrial and commercial use - Household - Public use 3. Employee per 1000 connections C. Engineering 1. Water loss 2. Production Efficiency 3. Supplied hours per day 4. Distribution Efficiency Table summarizes the performance of PDAMs in Table Summary of Performance of PDAMs in 2007 Tariff Average Tariff Rp/m3 1,301 Production Cost Rp/m3 1,459 Population Province Pearson 228,523,300 Total in Service Area Pearson 121,052,871 Served Pearson 34,203,992 Population Ratio Served/Service Area % 28% Service Area/Province % 53% Financial Management Debt Rp. Mil. 4,813,119 Sales Rp. Mil./Year 1,700,902 Production Capacity Installed lit/s 117,440 Produced lit/s 98,618 Staff per 1000 connection Mean 12 Min 3 Max 54 Source: Direktri Kinerja PDAM Tahun 2007 Based on these figures, the performance of PDAMs is evaluated to be less efficient in tariff and production cost and poorly performing by serving only of 28% of population in their service areas. It also accumulated large amount of debts, and has poor management capability in terms of the number of staff. Figure shows the summary of connection rate to the water supply system of PDAMs in each island. Republic of Indonesia March 2010

95 49 Mil. 31% 33% 12 Mil. 40% 40% 17 Mil. 65% 16% 5 Mil. 48% 6% Sumatra Kalimantan Sulawesi Java 133 Mil. 26% 71% Bali & Nusa Tenggara Maluku & Papua 12 Mil. 33% 33% Upper: Population in Island Middle: Served Population in Service Area/Total Population (%) Lower: Population in Service Area/Population in Province (%) Figure House Connection Rate to Water Supply System of PDAMs In Java Island, the total population is 133 million and 94 million, corresponding to 71% of the total population in Java Island, is living in the service area of PDAMs. However, PDAM is able to supply drinking water to only 26% of the 94 million population in their designated service areas. PDAMs in other islands distribute water to 30% to 65% of population in their respective service areas. However, its limited capacity lead to lower service rate to consumers. The principal legal basis for water supply in Indonesia is Law 7/2004 on Water Resources and its implementing regulation. During the current RPJMN, several decrees and regulations have been issued to secure the healthy PDAM and/or to restructure the debt of PDAM such as PDAM Rescue Program under MOF Decree PP16/2005 and Pre-53/PB/2006, MoHA Decree No. 23 /2006 which regulates water tariff for full cost recovery, and PDAM debt restructuring under 120/PMK.05/2008, etc. These institutional arrangements provide the conditions to PDAM for debt restructuring or setting of water tariff such as increase of customers, UFW reduction, and so on. However, the capacity improvement of most of PDAMs is insufficient to apply these governmental arrangements and they have insufficient funds for expansion of the water supply facilities in order to increase the revenue of PDAM. Pursuant to these laws and regulations, responsibilities for serving water supply are in the hands of the central and local governments, through the State Owned Enterprises (BUMNs) and local government owned enterprises (BUMDs). The law also allows private entities to participate in the water supply services. The BUMDs mandate is to have a function of Public Service + Profit Oriented which are different from PDAM (Semi Autonomous Corporation). It is possible that PDAM can function as BUMD under this law and be privatized. However, this is still in draft and is expected to be issued in the next RPJMN. The development of the rural water supply during the current RPJMN has been implemented mainly through support of donors such as the Project for Water Supply and Sanitation for Low Income Communities (PAMSIMAS) under the World Bank, the Community Water Services and Health Project (CWSHP) under ADB, and so on. However, it is reported that the creation of ownership of communities and leadership of operator are the key issues for the success of the project. Republic of Indonesia March 2010

96 (2) Sewerage Sector Improved sanitation facility includes flush/pour flush toilet or latrine connected to piped sewerage, septic tank or pit; a ventilated improved pit latrine; a pit latrine with slab or a composting toilet/latrine. These systems are being promoted by the government. As a result, the access rate reached to about 77% in Indonesia according to the BPS statistics 2008, which comprised of private, shared and public toilets or pits in On the other hand, toilet and latrine with cesspit or septic tanks are provided only to 49 % of the national population as shown in Table However, there is no definite target in RPJMN for the sewerage sector in terms of type of sanitation facilities. Table Type of Treatment of Human Waste in % Types Urban Rural Nation Urban Rural Nation Urban Rural Nation Toilet and latrine with cesspit / septic tank Ponds / rice fields, river / lake / sea, ground holes, beach / gardens, or others Source : Sensus, BPS Figure shows the access rate of the other developing countries in Asia. The progress of provision of sewerage facility in Indonesia is the lowest during the past 16 years ( ) among the countries listed. Access Rate (%) Japan India China Viet Nam Thailand Philippines Malaysia Cambodia Indonesia Year 2010 Source: United Nations Millennium Development Goals Indicators (online database, accessed on 8 August 2008). ESCAP Statistical Yearbook for Asia and the Pacific 2008; Figure Low Development Progress in Sewerage Sector Centralized sewerage systems were constructed at Banjarmasin, Jakarta, Balikpapan, Tangerang, Medan, Parapat, Surakarta, Yogyakarta, Cirebon, and Bandung. A sewerage system with wastewater treatment plant was constructed in Denpasar on February Figure shows the house connection rate in each city. Sewerage systems in these cities are operated by PDAMs, department of local government or BUMD, in accordance with the revision to PP25/2000. Republic of Indonesia March 2010

97 House Connection Banjarmasin 0.4% Jakarta 1.0% Balikpapan 1.0% Tangerang 2.0% Medan 2.5% Parapat 5.0% Solo 9.0% Yogyakarta 16.0% Cirebon 27.0% Bandung 30.0% Vientiane 0.0% Jakarta 1.9% Manila 7.0% Ho Chi Min 12.0% Kathmandu 22.0% Dhaka 30.0% Colombo 33.0% Phnom Penh 41.0% Ulaanbaatar 48.0% Karachi 50.0% Bangkok 50.0% Chengdu 50.0% Delhi 60.0% Shanghai 68.0% Kuala Lump 80.0% Tashkent 85.0% Seoul 98.5% Osaka 100.0% Honkong 100.0% Honkong Osaka Seoul Tashkent Kuala Lumpur Shanghai Delhi Chengdu Bangkok Karachi Ulaanbaatar Phnom Penh Colombo Dhaka Kathmandu Ho Chi Minh Manila Jakarta Vientiane Bandung Cirebon Yogyakarta Solo Parapat Medan Tangerang Balikpapan Jakarta Banjarmasin Data Source: Upper: Centralized Wastewater Treatment Plants in Indonesia/USAID Lower: Water in Asian Cities/ADB 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Figure Service Ratio of Major Cities in Indonesia and Asian Countries This regulation is an implementing guideline to the Law on Regional Autonomy in which the local governments are responsible for the provision of sanitation services, except for piped sewerage services in large and metropolitan cities which is a central government responsibility. The existing treatment plants apply the preliminary and/or the secondary treatment processes. However, the water quality of effluent in some of these systems does not meet the quality standards in Indonesia. The BOD of effluents in Jakarta, Bandung and Medan exceeds 50 mg/l, which corresponds to those in polluted river water, according to the Asian Water Development Outlook, 2007 (ADB). The figure also shows the house connection rate of major cities in other Asian countries. The access rate in Indonesia appears low, with that in Jakarta being the lowest among other capital cities in Asian countries. The low progress of sewerage system has induced water pollution of the rivers and drainage canals, especially in the urban areas such as Jakarta and Surabaya. On the other hand, model schemes applying community based sanitation (SANIMAS) have been implemented in medium and small cities under the finance of Indonesian Government, NGO/NPO and BORDA South East Asia. The model with small scale sewerage system and low cost provides Republic of Indonesia March 2010

98 facilities for public latrine and sewerage with distinguished user options for their activities. This scheme is being implemented in the entire Indonesia since (3) Solid Waste The following table shows the type of solid waste disposal and their share prior to the current RPJMN Table Type of Solid Waste Disposal Type of Disposal Urban Rural Nation Urban Rural Nation Transported by Pubic Service Dumping Creating Compost Burned Dispose to Rivers/lakes Dispose w/o Consciousness Others Source: BPS The public services such as transportation of solid waste, controlled/sanitary landfill is available only for 18% of the population. At the end of 2007, there are final disposal sites at 378 locations. Nevertheless, the method of opendumping is mainly applied on 80.6% of the disposal sites, while sanitary landfill is only applied at 2.8%. In general, open dumping tends to induce adverse effects on groundwater and the surrounding environment of the sites. Number of Final Disposal Sites : 378 locations Area (Ha) : 1.886,99 ha Method of processing : Controlled landfill : 15.5% Open dumping : 80.6% Burned or thrown to the forest : 1.1% Sanitary landfill : 2.8% Source: tanggal 25 maret 2008 The Indonesian Government has issued Law No. 18/2008 which obliges the local governments to prepare an action plan to close the final disposal sites with open-dumping method within one year and to implement the closure within five years. This law also describes the necessity of regional cooperation on solid waste management including reduction of solid waste. (4) Storm Water Drainage The drainage situation in Indonesia is reported as follows: Table Classification of Drainage around House (%) Flow Condition Rural Urban Nation Rural Urban Nation Rural Urban Nation Smooth drainage flow Very slow flow velocity Stagnant drainage No siginificant problem Republic of Indonesia March 2010

99 Source: Housing and Settlement Statistics, BPS About 14% of residents in Indonesia are facing drainage problems. Complaints concerning very slow flow velocity or stagnant drainage had been increasing. Moreover, drainage problems were caused by: a) restricted O&M activities for drainage system in the usual inundation areas; b) expansion of inundation areas due to lack of consideration for natural drainage flow from new housing developments; or c) obstruction of drainage flow due to illegal settlement. (5) Budget for Implementation of RPJMN The Cipta Karya has invested a budget of Rp. 5,390 billion in 2005; Rp. 3,757 billion in 2006; and Rp. 5,775 billion in 2007 as follows: Table Budget in Renstra and Actual Disbursement of Cipta Karya Renstra Actual Difference Renstra Actual Difference Renstra Actual Difference 3,340 5,390 2,050 4,510 3, ,050 5, Source: Page-18 of PU Strategic Plan Review Of the budget in 2006 and 2007, Rp. 805 billion in 2006 and Rp. 1,135 billion in 2007, which correspond to 21.5 % and 18.9 % of the total budget of Cipta Karya, respectively, is allocated to the improvement programs in the water supply and sanitation sectors. However, these investments are not enough to reach the target of the current RPJMN and Renstra. On the other hand, 90% of these budgets are actually disbursed, while the remaining 10 % is undisbursed in both 2006 and (6) Public and-private-partnership (PPP) Scheme The PPP scheme is expected to be one of the measures for securing funds for the development of infrastructure, especially in the water and sanitation sectors. Since 1990 s, water supply schemes in Indonesia have been financed by private sectors particularly in the major cities. No Table Water Supply Projects under Operation by PPP Scheme Projects Capacity (lps) Project Cost (Million US $) Developer Remarks 1 Medan (BOT) Lyonnaise Des Eaux Urban water supply 2 Batam (Concession) 3, Cascal By & Bangun Cipta Sarana Urban water supply 3 Jambi (BOT) PT. Noviantama Urban water supply 4 Palembang (Concession) 80 5 PT. Bangun Cipta Sarana Urban water supply 5 Pekanbaru (BOT) PT DAPENMA Urban water supply 6 North Serang (BOO) PT Sauh Bahtera Samudra Urban water supply 7 West Jakarta (Concession) 6, PT. Palyja Urban water supply 8 East Jakarta (Concession) 6, PT Thames PAM Jaya Urban water supply 9 Cisadane (JO) 3,000 N.A Tirta Cisadane Urban water supply 10 Serpong (BOT) 50 5 Bintang Jaya Housing develop. area 11 Lippo Karawaci (BOT) Lippo Karawaci (full private) Housing develop. area 12 Bintaro Jaya (BOO) Pembangunan Jaya Housing develop. area 13 Cikampek (BOT) N.A. Urban water supply 14 Bekasi - Kemang Pratama (BOO) PT Kemang Pratama Housing develop. area 15 Hunday Industrial Estate (BOO) 50 5 PT. Hunday Industrial estate Republic of Indonesia March 2010

100 No Projects Capacity (lps) Project Cost (Million US $) Developer Remarks 16 Kota Legenda (BOO) PT Cikarang Permai Housing develop. area 17 Bukit Indah Cikarang (BOO) PT Bukit Indah (full private) Housing/industial ara 18 Subang (BOT) PT MILD Urban water supply 19 Gajah Mungkur PT Tirta Gajah Mungkur. Urban water supply 20 Bawen (BOT) APAC INTI Urban water supply 21 Sidoarjo Regency(BOT) PT Vivendi Urban water supply PT Hanarida 22 Denpasar (BOT) PT Tirta Artha Buana Urban water supply 23 Samarinda (BOT) WATTS Urban water supply 24 Banjarmasin (BOT) PT Adi Karya Urban water supply 25 Tangerang City (BOT) Gadang Berhad Urban water supply Source: Progress Reports, Infrastructure Projects, Public Private Partnership, 2009, Public Private Partnership Central Unit, BAPPENAS There are 25 on-going projects applying for PPP scheme in the water sector of Indonesia. The investment cost for these projects is about USD 781 million. These are water supply projects for medium or small cities, or for housing development areas or industrial estates. The major problems in the PPP scheme are related to performance of PDAMs, who are the main buyer of the PPP scheme. Among these are: 1) financial deficits and debt due to high non-revenue water ratio and low tariff against production cost, and 2) poor performance of PDAM management. These problems prevent the introduction of private investment to water supply projects in large municipalities and cities. The followings are summary of PPP book 2009: Table Candidates of PPP Scheme in PPP Book 2009 Water Supply Projects in PPP BOOK Expected Water Modalities of Land Commencement Source PPP Scheme Acquisition of Operation Availability Municipality of Bandung Concession 2013 Unclear Pemkot/PDAM Municipality of Medan BOT 2011 Unclear Unclear Municipality of Bandar Lampung BOT 2013 Unclear Unclear DKI Jakarta -Bekasi-Karawang BOT 2014 Unclear Unclear West Cikarang & Cibutung Bekasi Regency Concession 2013 Unclear Unclear Bandung Regency Concession 2014 Unclear Unclear Regency of Sumedang Concession 2012 Unclear Unclear Indramayu Regency Concession 2013 Unclear Unclear Municipality of Cirebong Concession 2012 Unclear Unclear Pondok Gede, Bekasi Municipality Unclear Unclear Surakarta -Sukoharjo 2013 Unclear Unclear Klungkulung Regency 2014 Unclear Unclear Maros Regency 2012 Unclear Unclear West Bandung Water Conveyance: Alternative Unclear Unclear West Bandung Water Conveyance: Alternative Unclear Unclear East Bandung Water Conveyance: Alternative Unclear Unclear East Bandung Water Conveyance: Alternative Unclear Unclear Semarang Water Conveyance: Alternative Unclear Unclear Integrated Solid Waste Final Disposal/Treat. for Greater Bandung Concession 2011 Unclear Done by Gov. Integrated Solid Waste Final Disposal/Treat. for Bogor and Depok Concession 2011 Unclear Partly Done by Gov. Source: PPP Book, 2009 The PPP book includes 18 water supply projects and 2 integrated solid waste final disposal and Republic of Indonesia March 2010

101 treatment for Bandung and Depok. There has been no sewerage project identified to be executed by PPP scheme. As given in the table, these PPP projects have unclear risks such as allocation of water and land acquisition due to lack of studies which shall not only clarify these risks but also suggest the framework of PPP scheme including the roles and benefits of public and private investors and other stakeholders. The mentioned study, especially for the sewerage and solid waste management sectors, also includes a study on the feasibility for entrusting the operation of solid waste management system, including clean development mechanism (CDM), methane fuel, and so on. This is required to identify a way for introduction of private investments to these sectors Issues to be followed up by the RPJMN (1) Water Supply 1) Institutions and legislation 1. Poor institutional capacity and human resources; 2. Low level of approach and insufficient function of organizations, task forces, and authorities; 3. Insufficient activities of SPAM (PDAM), including recruitment and training of staff; and 4. Strengthening of SPAM management for local governments, especially PDAM. 2) Lack of Funds 1. Lack of funds for development and O&M due to low water tariff and accumulated large debts; 2. Investment for the development of SPAM, which shall depend on foreign loans rather than on developing domestic alternative funding sources; and 3. Low commitment and priority of funding source by the local government in the development of SPAM. 3) Decreased quantity and quality of water 1. Deterioration of river basins due to limited watershed management and to increased community activities and industry without any environmental protection; 2. Deterioration of water quality due to water pollution by waste water without proper treatment; 3. Water use licensing which is inconsistent with the regulations, causing conflicts among water users; and 4. Lack of stringent rules or regulations of water allocation to water users. 4) Minimum coverage and low quality of services 1. Large water losses in the piped system ranging from 10% to 50% with an average loss of around 37% in 2004; 2. Low pressure on the water distribution network; and 3. Production cost higher than water tariffs. Republic of Indonesia March 2010

102 5) Lack of ownership/commitment of the community in the development and O&M of the water supply system. (2) Sewerage 1) Strengthening of institution and legislation for the development of sewerage facilities and O&M performance stated in Article 21, paragraph (2) of Law No. 7 of 2004 on Water Resources, which states that the protection and preservation of water resources-one of themdone by means of setting and sanitation infrastructure; 2) Limited sources of investment funds for the sewerage sector due to low priority in development; 3) Improvement of worsened quality of water sources, especially in large urban areas, which shall tackle on the lack of master plan for waste water management, defining the goal of development of facilities and water quality; 4) Low levels of management organizations for O&M of sewerage facilities without proper treatment for waste water and full cost recovery for services; 5) Low awareness in the national level on the importance of sanitation; and 6) Cooperation of private sector on funding for wastewater development, management and O&M of the facilities. (3) Solid Waste Management 1) Strengthening of regulation that supports the implementation of the Law No. 18/2008 on solid waste management, including norms, standards, guidelines, manuals and operational procedures; 2) Development of funds for solid waste management apart from the government budget, including public funds, private cooperation, and both private investment and CSR funds; 3) Reduction of volume of solid waste due to: 1. Rapidly increasing volume of solid waste due to population growth in metropolitan and large cities; 2. Weak implementation of 3R principles (Reduce, Reuse, Recycle) on reduction of solid waste volume; and 3. Poor transportation services provided by the local government; 4) Lack of skills of human resources in solid waste management 1. Development of personnel of local governments and related stakeholders in solid waste management; 2. Adverse effects to environment in the surrounding area caused by open dumping of solid waste without proper treatment (controlled or sanitary landfill); and 3. Lack of management including technology for final disposal sites; Republic of Indonesia March 2010

103 5) Difficulties on acquiring land for new TPA and lack of funds for the construction of new TPA. (4) Drainage 1) Restricted O&M of drainage systems in the usual inundation areas due to insufficient funds; 2) Scarcity of solid waste disposal system and low public awareness on the negative effects of dumping garbage into drainage channels; 3) Expansion of inundation area due to lack of consideration for natural drainage flow from new housing development; 4) Lack of a master plan for integration of the existing drainage networks, considering global climate change; and 5) Obstruction of drainage flow by illegal settlements and restricted control by the local governments. (5) Acceleration of PPP scheme in water and sanitation sector in order to secure the funds for infrastructure development 1) Review and implementation of the model projects in water and sanitation sectors, especially those related to improvement of PDAM; 2) Execution of feasibility studies on the PPP candidate projects in PPP Book 2009 aiming to identify the most effective framework of each project for public and private investors including minimizing risks of the projects; 3) Enhancement of risk sharing procedure between the Government and investor, and other stakeholders; and 4) Capacity development of personnel through involvement in the planning and execution of PPP schemes Action Plan to Address the Issues The main issues to be addressed in RPJM are: 1) necessity of integrated approach for development and management; 2) development of human resources through management involvement in planning, implementation, and O&M of infrastructures; and 3) acceleration of PPP scheme for securing funds for development of infrastructure to cope with the national budget for water and sanitation sectors. (1) Integrated Approach for Development of Infrastructure in Water Supply, Sewerage, Solid Waste and Drainage In water and sanitation sector, the identified issues are related to the deterioration of environment in urban and rural areas as shown in Figure Republic of Indonesia March 2010

104 Rapid Population Increase in Urban and Rural Areas Increase of Water Demand Change of Drainage Flow Increase of Solid Waste Increase of Waste Water Environmental Pollution Loss of Natural Resources Water Resources, Inundation, Land Source: JICA Study Team Figure Current Problems in Water and Sanitation Sector In order to solve these issues and to cope with the rapid increase of population, an integrated approach from the view point of basin management for development of infrastructures including formulation of plan, implementation and asset management needs to be initiated. In this approach, the following considerations are further required: 1) Watershed management for conservation of water storage function in the river basin, 2) Appropriate spatial planning and implementation of the plan in the river basin, and 3) Integrated infrastructure development in order to harmonize the balanced social, economic, and environmental development in the river basin. To realize the mentioned approaches, all related agencies and/or organizations should be requested to coordinate well with the central and local governments. These agencies may include the Ministry of Forestry for watershed management, the Ministry of Mining and Energy for groundwater management, the Ministry of Public Works, and the local governments. BAPPENAS should allocate the budget for each agency. (2) Human Resources Development in Management of Infrastructure Development PDAM and the agencies at provincial or district levels are the major players responsible for the water and sanitation sector under the integrated coordination of Cipta Karya, as shown in Figure Republic of Indonesia March 2010

105 CIPTA KARYA, Ministry of Public Works CIPTA KARYA, Ministry of Public Works Local Government Water Supply Sewerage Drainage Solid Waste Management PDAM, PDAL, PDAM, PDAL, Province/ Province/ PDAM, BUMD PDAL, PDAM, BUMD PDAL, PD Kebersihan Province/ PD Kebersihan Province/ Community -- Based Based Organization Source: JICA Study Team Figure Related Agencies in Water and Sanitation Sector It is therefore essential to develop the capacity of staff of the concerned agencies. 1) Water Supply PDAMs cover 54% of the total population in Indonesia. Hence, an essential issue is the improvement of capacity development, especially on matters related to piped water supply system. The issues and suggestions on the improvement of PDAM are summarized as follows: Issues Suggestions a. Restructuring of PDAM Establishing autonomous body to Create business consciousness to all staff of PDAM b. Change of management Employment of top management from private sector to create business strategies and plans on the basis of benefit-oriented c. Restructuring of debt Preparation of restructuring plan including business plan and repayment schedule to SLA and other loans d. Minimizing water loss Reducing water loss by establishing flow/customer metering, repair of pipeline, and so on to increase production efficiency e. Expansion of water Urgent needs for PDAM Java integrated development of water source and its quality supply system improvement f. Training for staff Change business consciousness of staff of PDAM both in technology and logistics such as inspection and repair of facilities, reading of bulk flow and water meters, invoicing and collection of revenue, budget allocation, and so on g. Water tariff Cover production costs and acquire benefits from O&M, then initiate re-investment by introduction of appropriate water tariff setting system under management of the local government In order to improve the situation of PDAM, the GOI has executed reform programs which include debt restructuring and institutional strengthening in collaboration with national and international institutions during the current RPJM. Reduction of non-revenue water (NRW) such as leakage through pipeline, illegal water connection and delay of revenue collection, is one of the important issues in the current RPJMN. However, NRW is estimated to be as high as 50% in the maximum and 37% in average in As an example, if water leakage in NRW is reduced by 1% (production capacity of 98,618 lit/s x 86,400 seconds x 1 % / 100 lit/day/capita = 852,060 persons), PDAMs will be able to distribute clean water to incremental population of about 852,000. It also increases the income of PDAMs by converting the water loss to revenue water, considering the current costs. Republic of Indonesia March 2010

106 To reduce of the amount of NRW, it is essential to train the staff of PDAMs in terms of identification of leakage and illegal use in line with the establishment of flow and customer metering system and procurement of necessary apparatus for finding the exact location of leakage from pipelines. Moreover, training of administration staff on the establishment of administration system for the business and financial planning is necessary. These include pricing on water tariff, marketing for increasing customers, proper reading of flow and customer meters, invoicing to customers, collection of tariff, and so on. 2) Sewerage The planning and policy making capacity for deciding goals or targets for the development of sewerage infrastructure is essential in this sector. This was induced since the current RPJM does not describe goal and applicable tools like as shown in the following matrix in Figure 4.3.7: Application Tool Application of Aeration Application of Aeration Advanced Treatment Technology Off-site Treatment On-site Treatment Installation of Household Latrines Installation of Public Latrines Installation of Drainage System Application Technology Field Limitation imposed by Type of Water Supply House Connection Public Tap Hand-carried Supply No Drainage or Discharge Inferior Environment Improved Health and Sanitation Improved Living Environment Protecting Water Environment Protecting Water Environment and Amenities Policy Goal Source: Guidelines for Management of Sewerage Facilities in Developing Countries Figure Goal and Tool Matrix The current situation of sewerage system varies in the rural areas, cities, and in the metropolitan in accordance with the area s water supply situation. Therefore, the appropriate goals of RPJMN shall be established according to specific local conditions in line with the preparation of respective special plans. 3) Solid Waste One of the serious issues in solid waste management is the application of open dumping which have serious adverse effects to surrounding environment such as pollution of groundwater and air contamination with methane gas. This method without management for sanitary conservation is applied to more than 80% of the existing disposal sites, according to the presentation material of Cipta Karya in the workshop on May 26, To mitigate the situation, the GOI issued an act No. 18/2008 ordering the closure of open dumping sites within five years. Therefore, priority shall be given to closure of open dumping sites in order to minimize their adverse effects. Normally, Republic of Indonesia March 2010

107 covering the disposal sites with earth fill and/or provision of pipe facility to extract gas is implemented at the sites. In case of groundwater pollution at some sites, a measure for leachate is necessary to be considered in the planning stage. Moreover, the application of sanitary landfill is expected to be facilitated in RPJM in order to minimize impact on the environment surrounding the disposal sites. Also, land acquisition for new final disposal sites to replace the open dumping sites should be prioritized. In order to execute land acquisition smoothly, it is recommended to establish the followings: 1. Communication system and procedures between the related governments/agencies and residents in the land to be acquired for the new final disposal sites; 2. Plans which shall be prepared by the local governments or responsible bodies under the aforesaid law for the replacement of the existing open dumping; and 3. Approval procedures for the plans for land acquisition, including acceptance procedures from the residents. Under the above situation, it is suggested that training of the local government staff, focusing on engineering application methods and planning as well as O&M of disposal sites shall be conducted as soon as possible. On the other hand, the rapid increase of solid wastes is one of the serious concerns. To cope with such issue, the 3R principle, including the application of compost, has been implemented in the current RPJMN. Continuing education of residents in the communities should to be strengthened for further development of this measure. 4) Drainage Spatial planning in cities and provision of necessary drainage facilities are some of the issues to be managed and regulated by the local governments in the drainage sector. Furthermore, O&M shall be performed with the cooperation of communities under the management of the local government. (3) Introduction of PPP Scheme for Infrastructure Development in Water and Sanitation Sector There are many potential risks on the PPP scheme for water supply, which include: 1. Macro-economic risks such as inflation and interest rate fluctuation; 2. Risks on production such as limited supply of raw water, pipeline leakage, electricity power failure, unreliable meter reading, and poor quality of raw water; 3. Force majeure risks such as natural disaster, riots, terrorism, and labor strikes; 4. Risks on construction of facilities such as construction cost escalation, land price, and time overrun of construction period; and 5. Business risks on lower tariff, breach of contract by operator, premature termination by operator, demand uncertainty, and unpaid bills of consumers. Among the above-mentioned risks, the significant issues for private investors are: 1) delay of water source development by public sector; 2) natural fluctuation of water source and change of water Republic of Indonesia March 2010

108 allocation during the concession period for which the private investor may need an agreement of the minimum revenue guarantee to investor; 3) payment risk from end user such as PDAM; and 4) delay of the implementation of the project due to land acquisition for construction works. These risks are the key risks for pricing a project by the investors. It is, therefore, essential to identify the government and stakeholders responsibilities related to the reduction of these risks through the establishment of institutional arrangement and support in order to facilitate the PPP scheme. Currently, the GOI made efforts on guarantee funds to fill the gap between the investors requirement and the client s condition. This fund is expected promote the PPP schemes in infrastructure development in Indonesia. Also, the sustainable fund is a key issue for success of this measure. (4) Suggestions on Performance Indicators The following performance indicators are suggested to be applied in the water and sanitation sectors in RPJMN and RENSTRA for 2010 to 2014, taking into account the strategies and target and the stability, safety and sustainability of projects or activities in the sector: Indicators Impact Outcome Output Indicators Impact Outcome Water Supply Persons with disability have equal access to Water and Sanitation Services as other people in their communities, which result in improved quality of life and improved state of health The reduced number of persons infected by water and hygiene related diseases Satisfaction of people Stable Served population Supplied amount Service hours Safe Served water quality without any treatment at customers end Sustainable Affordable and reliable water tariff invoiced No. of person claiming to management bodies No. of local governments with proper number of engineers or technicians with certificates Stable: Facilities Water source capacity installed No. of facilities constructed, rehabilitated and extended No. of connections to the facilities Length of pipeline extended for distribution of water Number or length of repaired pipeline for reduction of UFW or NRW Safe: Standardization Quality of treated water Sustainable: Management No. of O&M bodies with evaluation of assets and management procedures No. of communities with active operation bodies No. of water meters installed or correctly operated and read Service hours: 24 hours operation No. and type of capacity building on financial and engineering aspects for bodies responsible for O&M No. and type of capacity building for communities Law and GR for accelerating infrastructure in water supply Sewerage Persons with disability have equal access to Water and Sanitation Services as other people in their communities, which result in improved quality of life and improved state of health The reduced number of persons infected by water and hygiene related diseases. Satisfaction of people Stable Served population Treated waste water amount Republic of Indonesia March 2010

109 Output Indicators Impact Outcome Output Indicators Impact Outcome Output Safe Treated waste water quality Water quality of rivers, ponds, and lakes Sustainable Affordable and reliable fees for treatment No. of person claiming to management bodies No. of O&M bodies with proper number of engineers or technicians with certificates Stable: Facilities Provision of toilet or latrine with cesspit or septic tank No. of facilities constructed, rehabilitated and extended No. connection to sewerage system Length of pipeline extended for collecting waste water Safe: Standardization Quality of treated water Quality of rivers, lakes and ponds with outlet of sewerage facilities Sustainable: Management No. of O&M bodies with evaluation of assets and management procedures No. of communities with active operation bodies No. and type of capacity building on financial and engineering aspects for bodies responsible for O&M Law and GR for accelerating infrastructure in sewerage Solid Waste Management Persons with disability have equal access to Water and Sanitation Services as other people in their communities, which result in improved quality of life and improved state of health The reduced number of persons infected by water and hygiene related diseases Satisfaction of people Stable Served population Transported amount of solid waste Treated amount of solid waste Safe No. of local governments with proper number of engineers or technicians with certificates Sustainable No. of person claiming to management bodies No. of local governments who prepared replacement plan of open dumping and implemented/monitored based on the plan No. of local governments with proper number of engineers or technicians with certificates Stable: Facilities No. of Final Disposal Sites with sanitary landfill No. of Regional Final Disposal Sites No. of transportation Safe: Standardization Preparation of Technical Guidelines for FDS with sanitary landfill No. of local governments with technical assistance and annual evaluation Sustainable: Management No. of O&M bodies with evaluation of assets and management procedures No. of communities with active operation bodies No. and type of capacity building on financial and engineering aspects for bodies responsible for O&M Law and GR for accelerating infrastructure in sewerage Drainage Persons with disability have equal access to Water and Sanitation Services as other people in their communities, which result in improved quality of life and improved state of health The reduced number of persons infected by water and hygiene related diseases Satisfaction of people Stable Area and duration of inundation by heavy rainfall in identified areas Safe Preparation of Technical Guidelines for drainage improvement No. of local governments with technical assistance and annual evaluation Sustainable No. of person claiming to management bodies No. of local governments with drainage plans and execution of their plans No. of local governments with proper number of engineers or technicians with certificates Stable: Facilities Length of drainage facilities improved or newly constructed Safe: Standardization Preparation of Technical Guidelines for drainage facilities No. of local governments with technical assistance and annual evaluation Sustainable: Management No. of O&M bodies with evaluation of assets and management procedures No. of communities with active operation bodies Republic of Indonesia March 2010

110 No. and type of capacity building on financial and engineering aspects for bodies responsible for O&M Law and GR for accelerating infrastructure in drainage improvement Application of some of the suggested indicators needs the improvement of measuring or monitoring system of related agencies in order to obtain the accurate figures of outcome of the infrastructures development. Especially, in order to monitor improvement of PDAM performance and management of other public services, the monitoring plan for these indicators shall be included into the development plan of the infrastructure Candidate Projects for New Blue Book and the Next Version of PPP Book (1) Status of the Projects in Blue Book and PPP book According to information from BAPPENAS, the status of projects on the Blue Book including revisions (BB) and the PPP Candidate Projects are listed in Table and Table , respectively. No. Project Title Table Blue Book Projects as of Sept PA/ TA Source of Fund Loan / Grant (USD Thous.) Counterpart Fund (USD Thous.) Total (USD Thous.) Description Bappenas 11, ,330 1 Water and Environmental PA 23,232 23,232 On-going. Sanitation (WES)-UNICEF 2 WASPOLA 2 TA Grant of AusAid 1,260 1,260 On-going. Will expire in There are still activities that must be resolved but a lot of consultant contracts have expired. 3 ISSDP (Indonesia Sanitation Sector Development Project) 4 Indonesia Slum Alleviation Policy and Action Plan (SAPOLA) 5 Indonesia Water and Sanitation Policy and Action Planning Facility (Phase III) TA TA Grant of Netherlan d Cities Alliance 8,000 8,000 On-going. 1, ,420 Project is listed in the Blue Book revisions I and listed in the Green Book SLA scheme is planned and ready for appraisal. Awaiting follow-up of the proposals that have been sent to the World Bank. PA 1, ,650 It is signed to Revisions Blue Book and listed in the Green Book Department of Health 110,510 9, ,920 1 WSLIC2 (Water and PA 94,100 9, ,510 On-going Sanitation for Low Income Community - Phase 2) 2 Community-Led Total TA On-going Sanitation (CLTS) Bill Gates 3 CWSH (Community Water PA ADB 14,670 14,670 On-going Services and Health) 4 ProAir (Rural Water Supply PA Gtz, Kfw 1,140 1,140 On-going and Sanitation in NTT Province) Cipta Karya 674,310 95, ,774 1 National Program for Community Water Supply and Sanitation Services (PAMSIMAS) 2 Urban Water Supply and Sanitation Project 3 Southern Bali Water Supply Project 4 Water Supply and Sanitation Project 5 Implementation of Western Java Environmental Management Project APL-2 PA PA World Bank World Bank 94,100 9, ,510 Listed in Blue Book On-going. 32,000 5,150 37,150 Listed in Project is already in the green book of 2007 and 2008, and negotiated in May TA JICA 5, ,500 Based on coordination meetings with the Directorate General of Cipta Karya, Dep. Public Works dated December 12, 2008, recommended the project is changed from a Technical Assistance to Project Assistance. It is in the revision process of FS. Indications Donor: JICA PA 50,000 6,000 56,000 There are difficulties on local governments to follow the SLA scheme, particularly relating to PDAM debt arrears. Therefore, it is in the process for looking for interest kab / the city. PA 20,000 4,000 24,000 No progress. Waiting for change the terms of APL-2 (trigger). Therefore, it is in the process for looking for interest kab / the city. Republic of Indonesia March 2010

111 No. Project Title 6 Metropolitan Sanitation Management and Health Project 7 Greater Surabaya-Umbulan Water Supply Project 8 Implementation of Batam Sewerage Project 9 Small Scale Water Treatment Plants for Emergency Relief 10 IKK Water Supply Program and Small Water Treatment Plant for Water Scarcity Area 11 Water Supply Project in Central Lombok Regency 12 Urban Renewal for Better Settlement on The Slums Area 13 Regional Solid Waste for Maminasata, South Sulawesi 14 Construction for Sewerage System Project in the City of Surabaya 15 Community Based Sanitation (SANIMAS) 16 Water Supply and Sanitation for Low Income PA/ TA Source of Fund Loan / Grant (USD Thous.) Counterpart Fund (USD Thous.) Total (USD Thous.) Description PA ADB 35,000 20,000 55,000 Ready for appraisal. It is proposed in the Green Book Also it is entered into the list of ADB's loan pipeline in 2009 and listed in GB PA PA PA PA World Bank Korea, Batam Spain/ Hangary JICA/Spai n/ Netherlan d Proposed by the Minister of Public Works Letter No.. HL Mn/724 November 21, Given the constraints of coordination and agreement among local governments has not been completed until the project is estimated this will not begin until the year 2009 that proposed to cancel the Bluebook from 2006 to 2009 and directed to be funded through the PPP scheme. Indications Donor: World Bank / JICA 40,000 10,000 50,000 Feasibility study was conducted in 2005 by the Millennium Science and Engineering Inc. (MSE) of funding from the U.S. Trade and Development Agency working together with Batam Industrial Authority. However, it is required to review the Feasibility Study document. Therefore, it is proposed to receive technical assistance from the Korean government in the form of grants that is required for the preparation of planning documents including the review of Feasibility Study and the DED. In the process of updating the readiness criteria by the ororita Batam. 50,000 14,270 64,270 Aims to anticipate natural disasters. Already listed in the Blue Book No FS. Is in talks with the donor phase Spain / Hungary. Spain waiting for a letter from Bappenas. 150,000 15, ,000 BB was listed in with the allocation of USD 30 million and proposed again through the Minister of Public Works No.. HL Mn/724 November 21, 2008 with the allocation of USD 365 million. For the initial phase is recommended for its allocation reduced to $ 150 million. This project can proceed to Phase II, if satisfied to be developed. Interest in the search process kab / the city through RPIJM. Proposed returning to the Netherlands financed through a letter No. Minister of Public Works. HL Mn/249 dated May 6, Not possible in JICA willing to finance a record review conducted prior to the minimum project value of USD 50 million. PA JICA 5, ,500 In the preparation of readiness criteria. PA JICA 9, ,510 In the preparation of readiness criteria. Project needs confirmation whether it will put into the BB PA JICA 40,470 4,047 44,517 Waiting for the signing of the Loan Agreement. Expect from the provincial cofunding for access roads. JICA want this project managed the administration but the administration wants this project is managed by the govt. Gowa. There was a team from JICA to assist GOI to strengthen the institutional arrangement. Position: Waiting for the results of the study until August No way was carried out in DED (detailed engineering design) for the Regional Landfill was done with grant funds from Indii (AusAid) began in March Already listed in GB Consists of a loan of USD million and a grant of USD 1 million. PA JICA 20, ,430 In the preparation of readiness criteria. PA Belanda 4,284 BB was proposed in by letter No. Minister of Public Works. HL Mn/294 dated May 25, Focus CK RPJMN Need to return to the Blue Book is proposed next. PA Belanda 13,513 BB was proposed in by letter No. Minister of Public Works. HL Republic of Indonesia March 2010

112 No. Project Title Communities (WSLIC)/PAMSIMAS PA/ TA 17 Climate Friendly and PA Sustainable City Development (Eco City) untuk Solid Waste Management Phase I: Solid Waste Improvement Management 18 Surabaya Sanitary Center and Environmental Education Park (Berubah menjadi TA) 19 Surabaya Sanitary Center and Environmental Education Park 20 Review of All Standars, Manuals, and Regulations Related to Building Code 21 Technical Assistance for Batam Sewerage Project 22 Metropolitan Sanitation Management and Health Project (MSMHP) 23 Sector Survey on the PDAM Asset Management dan Capacity Building of Drinking Water System Provision Management (SPAM) Project. 24 Revitalization of Solid Waste Final Disposal System and Its Operation in The Municipalities of Banjarmasin, Palembang, and Medan 25 Master Plan and DED for Drainage in Mebidang Metropolitan Area 26 The Preparation of Umbulan Spring/Greater Surabaya Water Supply 27 Implementation Stage of Regional Water Supply Project 28 Review Feasibility Study and DED Jakarta Wastewater Development Project (sama dengan Sewerage System Development Establishment of Jakarta Flood Management Network System) Source of Fund KfW, Germany Loan / Grant (USD Thous.) Counterpart Fund (USD Thous.) Total Description (USD Thous.) Mn/294 dated May 25, TOR is required to be adjusted. It is not to be recommended for inclusion in the proposed BB, yet. 75,600-75,600 Proposed again to put into DRPHLN-JM by Ministry of Public Works No.. HL Mn/450 dated July 31, Then it is listed in the Revision III BB and GB Consists of a loan of USD 68.6 million and a grant of USD 7 million. PA JICA 7, ,300 MOD has made signing Preliminary Survey dateed 15 January It is changed from PA to TA based on the number of the Secretary-General of Public Works dated HL Sj/410.1 about August 18, 2009 to Surabaya Change Scheme Activities Sanitary and Environmental Education Center Park Project (BB ID: P ) TA JICA MOD has made signing Preliminary Survey date 15 January Changed from PA to TA based on the number of the Secretary- General of Public Works dated HL Sj/410.1 about August 18, 2009 Surabaya Change Scheme Activities Sanitary and Environmental Education Center Park Project (BB ID: P ) TA JICA 8,600 1,720 10,320 TA is completed in March 2009and it is proposed a new name for the period The Project on Building Administration and Enforcement Capacity Development for Seismic Resilience. TA World Bank 1, ,100 Feasibility study is conducted in 2005 by the Millennium Science and Engineering Inc. (MSE) of funding from the U.S. Trade and Development Agency to work together with the Batam Industrial Authority. In the preparation of readiness criteria. TA ADB 1, ,500 Fact finding mission visited on May 2009, and followed by the signing of the MoU of Fact Finding Mission. TA JICA 4, ,600 In the preparation of readiness criteria. JICA wanted a change of name to "Assistance to PDAM on Asset Management Services". If possible combined with other similar activities such as the Capacity Building of Drinking Water Provision System Management (SPAM) Project. It is proposed to be processed in order to be funded by using the grant of JICA through the Secretary-General letter No. PU. HL Sj/410-2 dated August 18, It also proposed to enter into the "East Asia Climate Change Partnership" funding from the KOICA by mail Kabiro PKLN No. HL Sr/703 dated 17 September 2009 TA 2, ,520 In the preparation of readiness criteria. JICA is not willing to finance. If allowed to enter into the project Maminasata or EcoCity. It requires revision of location. This will be proposed again in TA IndII 1, ,100 In the preparation of readiness criteria. JICA is not willing to pay for having a bad experience related to land acquisition in Deli Serdang. Submitted to Indii. Da Beluma Indii response. TA IndII 2, ,400 Already listed in the Blue Book In the preparation of readiness criteria. JICA not willing to finance. Proposed by IndII. TA JICA ,100 On-going. TA JICA 7, ,700 In the preparation of readiness criteria. JICA target of this project could begin late Jakarta has sent a letter. Proposed rethrough of the Minister of Public Works Tax HL Mn/450 July 31, 2009 with the name of sewerage System Development Establishment of Jakarta Flood Management Network System Republic of Indonesia March 2010

113 No. Project Title 29 Collection Data for Sewerage System Project in The City of Surabaya 30 Sewerage System Development for Semarang 31 Sewerage System Development for Cirebon 32 Preparation Plan for Metropolitan Bandung and Capacity Upgrade for Bojong Soang WWTP 33 Regional Solid Waste for Mebidang Area, North Sumatera 34 Regional Solid Waste for Palembang Metropolitan Area 35 Sewerage System Development for Palembang City 36 Banyumas Water Supply Project 37 Jakarta Solid Waste Management Project 38 Master Plan and DED Preparation on Waste Water Sector Project 39 Preparation of Master Plan, Feasibility Study and DED for Drainage in Several Cities 40 Gas Emission Reduction for Solid Waste Sector in Indonesia 41 Analytical Survey for Review of Master Plan and Development of Feasibility Study for Surabaya Sewerage System Development Project 42 Sewerage System Development Project Establishment of Jakarta Flood Management Network System PA/ TA TA Source of Fund World Bank Loan / Grant (USD Thous.) Counterpart Fund (USD Thous.) Total (USD Thous.) Description Grants are administered by the World Bank. TA ADB 5, ,500 This project in 2009 is proposed only a Technical Assistance. In the preparation of readiness criteria. Indications Donor: ADB TA ADB 5, ,500 It was proposed as Project Assistance, but based on the coordination meeting with the DG. Cipta Karya - Dep. PU on December 12, 2008, this project in 2009 proposed only a Technical Assistance. waiting DED. Indications Donor: ADB TA Korea 2, ,200 Enter into the proposed revision of the Blue Book II, , based on meeting Cipta Karya - Dep. Public Works dated December 12, In the preparation of readiness criteria. Indications Donor: KOICA. Proposed re-through the Minister of Public Works No.. HL SJ/745 December 31, Proposed to enter into the "East Asia Climate Change Partnership" funding from the KOICA by mail Kabiro PKLN No. HL Sr/703 dated 17 September 2009 TA ADB 5, ,500 No. of Minister of Public Works. HL Mn/724 November 21, 2008, proposed as Project Assistance, but based on the coordination meeting with the DG. Cipta Karya - Dep. PU on December 12, 2008, this project in 2009 is proposed only a Technical Assistance. In the preparation of readiness criteria. Indikasi Donor: ADB TA ADB 5, ,500 Minister of Public Works. HL Mn/724 November 21, 2008, proposed as Project Assistance, but based on the coordination meeting with the DG. Cipta Karya - Dep. PU on December 12, 2008, this project in 2009 is proposed as a Technical Assistance. In the preparation of readiness criteria. Indikasi Donor: ADB TA ADB 5, ,500 Minister of Public Works. HL Mn/724 November 21, 2008, proposed as Project Assistance, but based on the coordination meeting with the DG. Cipta Karya - Dep. PU on December 12, 2008, this project in 2009 is proposed as a Technical Assistance. In the preparation of readiness criteria. Indikasi Donor: ADB TA Netherlan d 7,000 7,000 Match No. of Minister of Public Works. HL Mn/724 November 21, 2008, proposed as Project Assistance, but based on the coordination meeting with the DG. Cipta Karya - Dep. PU on December 12, 2008, this project in 2009 proposed only a Technical Assistance. In the preparation of readiness criteria. Indications Donor: ADB TA JICA 1,000 1,000 Proposed new addition is a foreign loan project for Revision DRPHLN - JM on the basis of the Minister of Public Works No.. HL SJ/745 December 31, Not recommended for re-proposed in TA IndII 5,000 Proposed new addition is for a foreign loan project for Revision DRPHLN - JM on the basis of the Minister of Public Works No.. HL SJ/745 December 31, TA IndII 5,000 It was proposed in by letter No. Minister of Public Works. HL Mn/294 dated May 25, Indii proposed to be funded in TA KfW, Jerman 7,033 7,033 It was proposed in by letter No. Minister of Public Works. HL Mn/294 dated May 25, Indii proposed to be funded in TA JICA 3, ,200 It is proposed to enter into DRPHLN-JM by Ministry of Public Works No.. HL Mn/450 dated July 31, TA JICA It is proposed to enter into DRPHLN-JM by Ministry of Public Works No.. HL Mn/450 dated July 31, Republic of Indonesia March 2010

114 No. Project Title 43 Capacity Development of 3R and Domestic Solid Waste Management System 44 Regional Solid Waste Management Project in Surabaya Metropolitan Area 45 Integrated Regional Solid Waste Planning and Management Project in Maminasata Metropolitan Area 46 Human Settlements Information Center Development PA/ TA Source of Fund Loan / Grant (USD Thous.) Counterpart Fund (USD Thous.) Total (USD Thous.) Description TA JICA 8,520 It is proposed to enter into DRPHLN-JM by Ministry of Public Works No.. HL Mn/450 dated July 31, TA JICA 3, ,200 It is proposed to enter into DRPHLN-JM by Ministry of Public Works No.. HL Mn/450 dated July 31, Already listed in GB TA JICA 1, ,700 It is proposed to enter into DRPHLN-JM by Ministry of Public Works No.. HL Mn/450 dated July 31, TA JICA It is proposed to enter into DRPHLN-JM by Ministry of Public Works No.. HL Mn/450 dated July 31, The Project on Building TA JICA 3, ,050 It is proposed to enter into DRPHLN-JM Administration and by Ministry of Public Works Enforcement Capacity No.. HL Mn/450 dated July 31, Development for Seismic Resilience 48 Global Partnership on Output TA World 11,250 11,250 It is proposed to enter into DRPHLN-JM Based-Aid Expanding Piped Water Supply to Surabaya's Urban Poor Bank by Ministry of Public Works No.. HL Mn/450 dated July 31, Ministry of Public Housing 246,259 72, ,364 1 Development of Low Cost PA 100,000 20, ,000 listed in the Blue Book Multi Storey Rental Housing in Big and Metro Cities 2 Large-scale Housing Development Project 3 TA for Development of Low Cost Multi Storey Rental Housing in Big and Metro Cities 4 Integrated Housing Microcredit Shelter Project 5 Accelerating Affordable Apartment Development for Owning and Rental Purposes 6 Lease-Purchase of Affordable Apartment Program 7 Development on Housing Data 8 Technical Assistance for Improvement of Self-help Housing Quality in Disaster- Prone Areas PA 121,000 49, ,000 It is proposed for inclusion in the Blue Book through a letter the Minister of Housing Tax KU SM/XI/534 dated 26 November TA 1, ,100 Listed in the Blue Book TA 5,750 1,500 7,250 New proposals are submitted through the Secretary Ministry of Public Housing No. KU SM/XI/534. On 26 November This project aims to develop microcredit housing and strengthen the capacity of financial institutions to non-bank microcredit finance housing development for lowincome communities. Activities being revised proposal to be submitted to Indii. No indication donors. TA 5, ,510 New proposals are submitted through the Letter of the Minister of Public Housing No. KU SM/XI/534. On 26 November This project aims to develop a policy of modest apartment building owned (Rusunami) and increase private sector participation in financing. No indication donors TA 4,400 4,400 New proposals are submitted through the Letter of the Minister of Public Housing No. KU SM/XI/534. On 26 November This project aims to develop a policy of modest apartment building owned (Rusunami) and increase private sector participation in financing. Activities being revised proposal to be submitted to the donors, there are indications IndII.Belum TA JICA 1, ,650 New proposals are submitted through the Letter of the Minister of Public Housing No. KU SM/XI/534. On 26 November This project aims to develop a policy of modest apartment building owned (Rusunami) and increase private sector participation in financing. No indication donors TA JICA 2, ,500 Already listed in the Revision II Blue Book New proposals are submitted through the Letter of the Minister of Public Housing No. KU SM/XI/534. On 26 November This project aims to develop a policy of modest apartment building owned (Rusunami) and increase private sector participation in financing. No indication donors 9 Integrated Low Cost Self- PA 5, ,954 It is a major new initiative proposal by Republic of Indonesia March 2010

115 No. Project Title Help Housing Development Project PA/ TA Source of Fund Loan / Grant (USD Thous.) Counterpart Fund (USD Thous.) Total Description (USD Thous.) Minister of Housing letter No. KS SM/VII/303 dated July 27, 2009 regarding Proposed Activities Technical Assistance (TA) grants for funding (grants) from JICA overseas financial year Local Government 28,907 6,000 34,907 1 Expanding Piped Water TA World 2,500 2,500 Proposed new addition is for a foreign loan Supply to Surabaya's Urban Poor Bank project for Revision DRPHLN - JM on the basis of the Minister of Public Works No.. HL SJ/745 2 Expanding Piped Water Supply to Surabaya's Urban Poor 3 South Pekanbaru Water Supply Development Project PA World Bank 2,407 2,407 Grants are administered the World Bank. In the process of grant agreement. PA 24,000 6,000 30,000 SLA scheme planned and ready for appraisal Table Status/Progress of PPP Candidate Projects as of Sept No. Project Status 1 Bandar Lampung Location: Bandar Lampung Capacity: 500 l/s Estimated Investment: Rp. 160 billion Pre-FS 2 Banjarmasin Bulk Treated Water Supply Location: Banjarmasin Estimated Investment: U.S. $ 5 million Winner is determined 3 Cikarang Water Supply Location: Cikarang, Bekasi regency, West Java Capacity: 330 l/s Estimated Investment: Rp billion Pre-FS 4 Ciledug Water Supply Location: Ciledug, Tangerang City Section South Capacity: 400 l/s Estimated Investment: U.S. $ 13 million Still in the planning stage 5 Cimenteng Drinking Water Treatment, Bandung Capacity: 1100 l/s Estimated Cost of Investment: U.S. $ 18 million Technical discussion was conducted on August 3, 2007 at Bandung Letter of request for technical assistance received from the Mayor of Bandung on August 30, 2007 Review of Pre-Feasibility Study has been conducted by Team SID Letter technical assistance agreement was submitted to the Mayor Bandung on 21 September 2007 Provision of technical assistance consultants for project preparation was done Preparation of short list by the auction committee Bappenas As of June 17, 2008 at 16:00 as the deadline for revenue proposal, only 2 companies that includes a proposal namely Poyry Environment GmbH, Germany and PT. Waseco Tirta, Indonesia Some companies claimed back 4 from the revenue proposals namely: Egis BCEOM, France; C. Lotti & Association, Italy; SMEC International, Australia and MinConsult,Malaysia. This person months expected because the allocation for foreign experts that is too small 3 person months. Evaluation of technical proposals was held on 4-6 July 2008 Preparation of feasibility study is planned to begin to do in September Republic of Indonesia March 2010

116 No. Project Status 6 Kab. Bandung Water Supply Location: West Java Capacity: 300 l/s Estimated Investment: U.S. $ 17 million Bandung Regency has Eastern been established as a location project development. The scope of the project include the development of science and networking distribution (satellite concession) Pre-FS review Who's done Repair project scope resulting from the expansion West Bandung regency, find solutions to problems Raw water sources and improve the project design to make it more interesting for investors. Including Studies on demand, studies of willingness to connect and willingness to pay has been completed. Based on the study of technical and financial analysis, necessary government support in the form of scale dam construction Citarik small river to make this project feasible. Need to coordinate among stakeholders (central and local) to decide whether the project will be continued. Presentation of study results was done to local governments. Need to discuss more information among the stakeholders in the center and local government for formulating government support required. 7 Dumai City Water Supply Location: Riau Province Capacity: 500 l/s Estimated Investment: U.S. $ 44 million Preparation of Pre-FS is performed by Dumai City Government. Dumai City Government is considering the implementation of the project scheme by EPC turn-key, and financed by the budget itself. Rokan Hilir Government does not give permission to the utilization of water resources under the raw. Due to the lack of progress of this project, internal meeting is required. The National Secretariat decided to issue the proposed project. A list of 10 models of PPP project is prepared. Proposal expenditure from the list of models to project meetings. 9 Water Kab. Tangerang Location: West Java Capacity: 900 l/s Estimated Investment: U.S. $ 37 million PQ has been completed, and 4 participants are qualified. The bidding has been completed and documents are without indication of support. Government invited offers in terms of revenue proposals in July 2007 Pemasukaan bid proposals on November 5, 2007 Training evaluation techniques and negotiation proposal to offer Tangerang District Procurement Committee held on October bidders bid includes proposals Minister of Public Works decided to continue the bidding process Accuatico is selected as the winner. Contract Pemkab. Tangerang and PT Accuatico as the winner of the tender is signed on August 4, This cooperation is conducted with the pattern during the 25-year concession. 10 Cirebon Water Supply Capacity: 300 l/s Estimated Investment: US 90.6 million Preparation of Pre-FS 11 Karian Water Supply Stage planning 12 Duri Water Supply Capacity: 250 l/s Estimated Investment: U.S. $ 15 million Stage planning 13 Jatinangor Water Supply Location: Jatinangor, Sumedang, Java West Capacity: 221 l/s Estimated Investment: U.S. $ 3.5 million Pre-FS review is required. 14 Uprating WTP Kali Garang Location: Kota Semarang Capacity: 600 l/s Estimated investment: U.S. $ 5 million Developer: PT. Degremon Construction underway and expected to be completed in Coral Pilang IV Location: City of Surabaya Capacity: 2000 l/s Estimated Investment: U.S. $ 25 million Feasibility Study (FS) and Amdal been completed. 16 Menado Bulk Water Location: Kota Manado Republic of Indonesia March 2010

117 No. Project Status Capacity: 400 l/s Estimated Investment: U.S. $ 5 million Feasibility study (FS) was completed 17 Kota Jambi Location: Jambi Capacity: 250 l/s Estimated Investment: US Million Capacity Building to the PPP team held on August 2007 Determination of winner on 8th September 2008: Tirta Siskem jambi Consortium Negotiation contracts 18 Pontianak Location Pontianak Capacity: 1:21 l/s Estimated investment: USD 2.62 million Feasibility study (FS) was completed 19 Menganti Water Supply (District Location: Menganti District, District Gresik, East Java Gresik) Capacity: 160 l / d (intake) & 150 l / d (WTP) Estimated investment: USD 49.3 billion Review and Pre-FS 20 Raw Water Supply Project for Tukad Unda, Klungkung 21 Provision of Drinking Water Zone Prima Kab. Sleman 22 Drinking Water Supply for Kab. Maros Scheme Socialization Application letter from the Regent of Klungkung KPS has accepted on June 8, 2007 Conducted on Socialization June 2007 Letter of request technical assistance from the Regent of Klungkung has accepted on July 17, 2007 Approval of technical assistance to the Regent of Klungkung has delivered on August 20, 2007 Capacity Building to the KPS team has held on 2-3 Nov As of the date of June 9, 2008, as many as 10 companies have submitted EOI. Evaluation of EOI was held on 4-6 July 2008 Follow-up Issues ADB Request: acceleration of approval procedure and draft procurement document consultant Estimated Project Value: U.S. $ 4 million Letter of request technical assistance from the Regent of Sleman has received On July 21, 2007 Initial project data has been obtained from the Regional Government Retrieved information that the Regent of Sleman is dealing with cases corruption Follow-up Issues Research and assistance Delayed the project to cases of corruption resolved The letter requests assistance from Regent Maros has received January 17, Dit. PKPS has conducted field visits Bappenas to approve a letter of assistance have been sent on May 6, Regent Maros convey its commitment to follow the appropriate procedure through the Presidential Regulation 67/2005 letter dated June 2, Follow-up Issues Finalization by the consultant KAK-TA INO 4872 Request approval for KAK to ADB for funding through the PDF. Procurement plan for consultant 23 Regency of Karawang Estimated Investment: U.S. $ 9.18 million Planning phase 24 Regency of Pemalang Capacity: 250 l/s Estimated Investment: Rp. 96, Billion Pre-FS 25 Regency of Subang Capacity: 75 l/s Estimated Investment: Rp. 52 billion Planning phase 26 Municipality of Bekasi (Pondok Gede and Jati Asih) Capacity: 330 l/sonds (intake) and 300 l/s (WTP) Estimated Investment : Rp billion Pre-FS 27 Umbulan Water Supply Capacity: 4000 lpd Estimated Investment: USD 90 million Stage planning 28 Balik Papan Capacity: 450 l/s Estimated Investment: Rp Billion Capacity Building to the PPP team held on Aug Auction ads in the daily Republika pp. 21 PQ Registration and refund documents on 2-9 Jan Public illustrate PQ 16 April 2007 Republic of Indonesia March 2010

118 No. Project Status The deadline for entries revenue PQ documents April 2007 Draft contract already exists. Determination winners, waiting for the results of consultations with Parliament 29 Cilacap Capacity: 50.4 l/s Estimated Investment: Rp Billion Medium Pre-FS and review conducted 30 Regency of Kebumen Capacity: l/s Estimated investment: USD 27.1 billion Pre-FS formulated Source: PPP HP, BAPPENAS Project Assistance 1) Water Supply Sector Most of the projects in BB are initiated in recent years. The nationwide projects on urban water and sanitation which is expected to contribute to improvement of PDAM performance are still in the preparation stage. Also, IKK water supply programs have been implemented. But the number of IKKs, where improvement, rehabilitation or expansion works are executed, does not meet the required number of IKKs. On the other hand, the water supply projects for the metropolitans and/or major large cities are planned to be implemented by the PPP scheme, but most of the candidate projects in PPP are still at study stage and completed projects are none during the current RPJM period, excluding small scale projects. The National Program for Community Water Supply and Sanitation Services (PAMSIMAS) is currently being implemented and is desired to be continued in the next RPJM in order to improve the water supply condition in the rural areas of Indonesia. 2) Sewerage Sector The lone completed BB Project in the sewerage sector during the current RPJM is for Denpasar City in which the construction work was completed in 2007 and the 2 nd Phase of the Project is being executed. Projects for Jakarta, Surabaya and Batam Island are expected to be executed during the current RPJM, but not yet realized. The Metropolitan Sanitation Management and Health Project involving sewerage and solid waste management for five cities in Indonesia is expected to be implemented under PA of ADB. The community-based sewerage projects for the urban poor and rural areas are being implemented under the aforesaid PAMSIMAS and the Department of Health. 3) Solid Waste Management The current BB includes Solid Waste Management for Maminasata, which is under appraisal of JICA for providing Japanese Yen Loan. 4) Drainage Improvement There is no definite project in BB. However, drainage work is expected to be included into the sewerage projects or sanitation improvement projects. Technical Assistance There are 42 projects in the technical assistance of BB. Of these 42 projects, Cipta Karya occupies 30 projects covering water supply, sewerage, solid management and drainage. Considering the large increase from 13 projects in the original version of BB, the need for development and improvement of infrastructures in these sectors will increase in the coming years. Therefore, candidate projects for Republic of Indonesia March 2010

119 the next BB are expected to be formulated. (2) Necessity and Priority of Projects in the Blue Book ) Status of Preparation of Candidate Projects for Blue Book There is no clear information and data on the candidate projects for the next version of the Blue Book, although these are scheduled to be provided officially by BAPPENAS to the Study Team. Therefore, the Study Team assumed the candidate projects required for solving the issues and problems on the basis of the data and information collected through hearings to Cipta Karya and BAPPENAS. Table shows the major activities or projects considered by Cipta Karya in the formulation of plans. Also, this table indicates the expected donors for fund sources by Cipta Karya. However, the project components, cost, present situation for each project or city are still under preparation into application form of BB by Cipta Karya. On the other hand, Cipta Karya has prepared the budget allocation plan for with a total budget of Rp. 226,000 billion, of which Rp. 109,956 billion and Rp. 57,090 billion are expected to be allocated to water supply, and sanitation and environmental improvement, respectively, according to the Final Report of LEMTEK. In preparation of the budget, the following policies are applied: Table Expected Budget of Cipta Karya for Water Supply and Sanitation Sector in RPJM Policy Strategy Activity Amount of Budget (Rp. Billion) I. Improvement of Social Welfare 1. Improvement of Infrastructure and settlement facilities with priority of poor areas Water supply Restructuring of environmental settlement 25, Community-based infrastructure Water supply 2,000 development Restructuring of environmental settlement 23, Improvement of Inter Agency Water supply 265 Cooperation Restructuring of environmental settlement - II. Improvement of Environmental Quality III. Boosting of Economic Growth 1. Development of infrastructure Water supply 12 Restructuring of environmental settlement - 2. Development of infrastructure against Water supply - climate change Restructuring of environmental settlement - 3. Promotion of public campaigns Water supply 264 Restructuring of environmental settlement - 1. Development of infrastructure for Water supply 500 enhancing competitiveness Restructuring of environmental settlement 9, Increase of participation and cooperation of state enterprises and other Water supply 7,900 enterprises/private sector Restructuring of environmental settlement - 3. Improvement and development of Water supply 72,400 infrastructure for economic development Restructuring of environmental settlement 12, Strengthening and development of linkage Water supply - between region, urban and rural areas Restructuring of environmental settlement - Republic of Indonesia March 2010

120 Policy Strategy Activity Amount of Budget (Rp. Billion) IV. Capacity Building of Regional Government Grand Total of Required Budget for RPJM 1. Revision of laws and regulations related Water supply 233 to the minimum service standard Restructuring of environmental settlement Encourage cooperation between institutions to strengthen the financial and Water supply 192 technical capacity of local government to achieve the development goal Restructuring of environmental settlement Establishment of coordination and control mechanisms to realize the national Water supply 450 policies and strategies in urban areas Restructuring of environmental settlement - 4. Increase of the role of government and Water supply 720 provinces in improvement of performance of infrastructure and settlement facilities Restructuring of environmental settlement 85 Source: Final Report, Dec. 2009, LEMTEK Water supply 109,956 Restructuring of environmental settlement 57,090 From the above table, it is recognized that the following issues are focused in the next RPJM: a) Community-based infrastructure development; b) Infrastructure development and improvement for building strong economic growth; c) Revision and addition of laws and regulations to support the above activities; and d) Capacity development of local government and related agencies. 2) Priorities for BB Project In order to realize the above strategies, the projects or studies in Blue Book shall have the following objectives: a) Water supply projects shall improve the performance of PDAM in urban areas, especially on UFW reduction and increase of connections to support restructuring of PDAM, and development of community-based water supply facilities with sustainable operation and maintenance capacity of communities for realizing the MDG. b) Sewerage projects shall strengthen the existing sewerage facilities and quality of service in the metropolitan or large urban areas on served population in order to create better water environment and shall maintain water sources for drinking water supply in terms of water quality. On-site facilities shall be further developed in the rural areas for realizing the MDG. c) Solid management projects shall develop final disposal sites for fulfilling the requirements of Law No. 18/2008. d) Drainage projects shall include the public awareness campaign for environment and sanitation as well as improvement of drainage networks. e) The candidate projects in RPJM shall have high priority excluding projects which have not been realized for three years. f) All the projects shall contribute to the target outcome indicators set in the Draft RPJM : Access rate to drinking water for 70 % of the population at the end of 2014, with 32% access to piped drinking water supply and 38% access to non-piped water; Availability of access to waste water management system centered (off-site) to 10% Republic of Indonesia March 2010

121 of the total population through a system of centralized waste water management for urban areas by 5% and communal system of 5%, and providing access and improving the quality of waste water management systems of local (on-site) to 90% of the total population; Availability of access to solid waste management for 80% of households in urban areas; and Reduction of habitual inundation area of 22,500 ha in 100 strategic urban areas. From the above conditions, high priority shall be given to the candidate projects in Table Table Preliminary Information on Activities of Cipta Karya by Using Foreign Loan/Grant No. Description Expected Funding Source ADB KfW WB JICA Others High Priority Required Cost (USD m) Republic of Indonesia March 2010 RPJM Water Supply 1 Water Supply System IKK P Rural Water Supply System (PAMSIMAS) 3 Water Supply System Improvement 4 Water Supply System - Incentive for PDAM (Grant) 5 Global Partnership on Output Based-Aid Expanding Piped Water Supply to Surabaya' Urban Poor 6 Banyumas Water Supply Project Remarks P 14 Preparing business plan for 20 PDAM using grant from IndII (Ausaid) NA Water Supply System - SLA NA - UWSSP (Kota Bogor, Kab. Muara Enim, Kab. Kapuas) P 37 - Jakarta, Bekasi, Karawang Water Supply P 5 TA is required. - Master Plan for West Semarang Water Supply P On going project - Umbulan Water Supply P 5 TA is required. - Southern Bali Water Supply P P 50 - Southern Pekanbaru Water Supply P 30 funded by loan from DANIDA (Denmark) Solid Waste Management 1 Regional Final Disposal Site Mebidang (CDM) P 6 2 Regional Final Disposal Site Bandung Raya (CDM) P P NA Indication donor: World Bank/JICA 3 Regional Final Disposal Site NA Master Plan has been already prepared Semarang (CDM) 4 Regional Final Disposal Site Denpasar NA Master Plan has been already prepared 5 Regional Final Disposal Site Mamminasata P 44 DED is still being prepared, funded by grant of IndII (AusAid) 6 Regional Final Disposal Site Surabaya Metropolitan (CDM) P P 3 TA to JICA Regional Final Disposal Site 1 Jakarta Metropolitan 8 Regional Final Disposal Site Palembang (CDM) 1 9 West Java (Jabodetabek, Serang, Cirebon, Kota Bandung, Kota Cimahi, Kab. Bandung, Kab. Sumedang) P 24 WJEMP (West Java Environmental Management Project), Master Plan should be reviewed. 10 Gas Emission Reduction for P 7 Solid Waste Sector in Indonesia 11 Capacity Development of 3R 5

122 No. Description Expected Funding Source ADB KfW WB JICA Others High Priority and Domestic Solid Waste Management System 12 Name of cities which is being prepared for CDM Concept application - Surakarta P - Malang P - Pekalongan P - Mataram P - Bukittinggi P - Kab. Serdang Bedagai P - Bitung P - Amuntai P - Cilegon P - Sidoarjo P - Jombang P - Jambi P - Solok P - Bontang P Required Cost (USD m) RPJM Remarks 76 These cities are included in activity namely "Climate Friendly and Sustainable City Development (Eco City) Phase I : Solid Waste Improvement Management" - Padang P NA - Pekanbaru P NA - Banda Aceh P NA - Bandar Lampung P NA - Batam P NA - Yogyakarta P NA - Cirebon P NA - Balikpapan P NA - Bogor P NA - Banjarmasin P NA - Samarinda P NA - Pontianak P NA - Palangkaraya P NA - Manado P NA - Ambon P NA - Jayapura P NA Sewerage 1 Development on existing network of WWTP in: Medan P 3 Master Plan is still under review Jakarta (new WWTP) 8 Master Plan should be reviewed Bandung 3 Master Plan should be reviewed Cirebon 3 Master Plan should be reviewed Yogyakarta P 3 Master Plan is still under review Surakarta 21 Denpasar Brown Banjarmasin 3 Tangerang 3 Batam 50 Samarinda 3 Balikpapan 3 2 New WWTP construction in: Semarang 5 Surabaya 50 Makassar P 30 Environmental Impact Assessment is still being prepared, funded by grant of IndII Palembang 6 Mataram 3 Drainage 1 Preparation of Master Plan, Feasibility Study and DED for Drainage in Several Cities 7 2 Batam NA 3 Palembang NA 4 Pekanbaru NA Republic of Indonesia March 2010

123 No. Description Expected Funding Source ADB KfW WB JICA Others High Priority Required Cost (USD m) RPJM Remarks 5 Cilegon NA 6 Bekasi NA 7 Tangerang NA 8 Bandung NA 9 Surabaya P NA 10 Pontianak NA 11 Banjarmasin NA 12 Samarinda NA 13 Balikpapan NA 14 Makassar P NA 15 Denpasar NA 16 Mataram NA 17 Ambon NA 18 Jayapura NA 19 North Coast of Central Java (Kendal, Pekalongan, etc) NA 20 Semarang P On-going 21 Jakarta P P included into Jakarta Sewerage Project Regarding to the project proposal information for Blue Book , it is noted that the projects in the Table are still tentative and subject to change as of September The candidate projects are scheduled to be decided in March (3) Preliminary Selection Criteria for Evaluation of Candidate Projects According to the Technical Guidelines on Submission of Proposals for Projects Financing by Foreign Loans and/or Grants Book I: General Guidelines published by BAPPENAS in 2006, foreign sources of funding are required for accelerating the achievement of national development targets with priorities indicated in RPJM, which is to be mentioned in the Foreign Loan Requirement Plan (RKPLN) prepared by BAPPENAS and the Ministry of Finance. It is proposed that the selection of candidate projects to be based on the following issues for respective development strategy and activities, although no project digests of new candidate projects are available at the time of the preparation of this report: (1) Suitability for Regional and Sector Development Policy/Strategy; (2) Urgency and Necessity; (3) Financial Issues; (4) Economic Issues; (5) Issues on Implementation; and (6) Appropriateness for international cooperation in technical difficulty. These issues are further defined as shown in Table The issues and weights in the table are tentative values, which shall be finalized between BAPPENAS and the line ministries. Republic of Indonesia March 2010

124 Republic of Indonesia March 2010 Table Evaluation Model for Candidate Projects of Blue Book in Water and Sanitation Sector Categories Evaluation Items Weight Point: Score 25% Regional Development Plan in RPJMN 15% Not strategically developing between items 1 and 3 Not strategically developing between items 3 and 5 Strategically developing area area in RPJM area in RPJM but the concept in RPJM 1. Fitness for Regional and Sector Development Policy/Strateg y 2. Urgency and Necessity 3. Financial Issues 4. Economic Issues 5. Issues on Implementatio n 6. Appropriatene ss for international cooperation in technical difficulty. is applicable Sector Development Plan in RENSTRA 10% Not strategically developing between items 1 and 3 Not strategically developing between items 3 and 5 Strategically developing area area in RENSTRA area in RENSTRA but the in RENSTRA concept is applicable Sub-total 25% Gap of Present Status and National or 15% < 5% 5% to 10% 10% to 20 % 20% to 30% > 30% MDG Target of Outcome Indicator Contribution to poverty alleviation and 10% Not included into Project between items 1 and 3 One of Project Components between items 3 and 5 Main Purpose of the Project equitable growth mechanism Components Sub-total 20% Financial IRR 5% < 5 % 5% to 8 % > 8% 8% to 12% > 12 % Availability of financial or business plan 5% No preparation activity under preparation Prepared Reasonable plan Realistic Plan Possibility of full cost recovery by revenue 5% Revenue/Cost <50% 50% to 80% 80% to 100% 100% to 120% > 120% Application of Sub-Loan of Foreign Loan 5% Applied Not Applied to Project Sub-total 10% Number of beneficiaries 5% < 10,000 10,000 to 50,000 50,000 to 100, ,000 to 200,000 >200,000 Economic IRR 5% < 5 % 5% to 8 % > 8% 8% to 12% >12 % Sub-total 10% Maturity 3% Master plan Preliminary feasibility study Feasibility study Basic design Detailed design Capacity of responsible agencies for 5% Bad between items 1 and 3 Fair between items 3 and 5 Excellent implementation and O&M Social and environmental issues 2% EIA is planned to be between items 1 and 3 EIA is being executed. between items 3 and 5 EIA is completed. executed. Sub-total 10% Technical Difficulty 7% Conventional technology in Indonesia between items 1 and 3 Necessity of foreign support in safety and reliability of applied technology Difficulty of Private Finance 3% High FIRR between items 1 and 3 Reasonable FIRR but need of government finance to part of the Project Accessibility of Foreign Experts to the Project Site from the view points of culture, security, and so on between items 3 and 5 between items 3 and 5 2% Bad between items 1 and 3 Fair between items 3 and 5 Excellent Application of new/ high technology in Indonesia Low possibility of private investment Sub-total Total Score 100% Final Report Chapter 4

125 4.4 Water Resources Sector The water resources sector consists mainly of four sub-sectors, namely: i) water resources development and management, ii) irrigation development and management; iii) raw water supply and management; and iv) flood control and coastal protection. The irrigation sub-sector is one of the important water resources infrastructures needed to support the sustainable growth of Indonesia. Moreover, it is recognized as the dominant sector in terms of water use (utilizing 86% of the total water use in the whole country). Hence, irrigation infrastructure is separately discussed in some parts of this section Current Development Program (1) Current Medium-Term Development Plan (RPJM) The following five programs for water resources development were set out in the current RPJM : i) Program for the development, management, and conservation of rivers, lakes, and other water sources; ii) Program for the development and management of irrigation networks, swamp irrigation networks and other forms of irrigation networks; iii) Program for supplying and managing raw water; iv) Program for controlling floods and safeguarding coastal areas; and v) Program for reforming institutions and administrative aspects. Specific activities under each program mentioned above are proposed in Chapter 33 - Accelerating Infrastructure Development of the current RPJM The key issues addressed in the current RPJM for formulating the above programs are as follows: i) Imbalance between supply and demand of water both in the spatial and temporal perspectives; ii) Increasing threat to the sustained carrying capacity of water resources in terms of surface as well as ground water; iii) Decline in the capacity to supply water; iv) Increasing potential of water conflicts; v) Not optimal utilization of irrigation networks; vi) Widening extent of coastal abrasion; vii) Weakness of coordination institutions and administration; viii) Low quality of data management and information system; and ix) Damaged water resource infrastructures due to natural disasters, specifically in Aceh and North Sumatra. Republic of Indonesia March 2010

126 (2) Current Renstra Among the several ministries involved in executing the programs for water resources sector, the Ministry of Public Works (MPW) governs in terms of the allocated government budget for implementation of the programs. The MPW formulated the national strategic development plan for Renstra to implement the programs in line with the current RPJM The contents of the Renstra include challenges, vision, mission, aim, strategies, policies, programs, targets, activities and outcome performance indicators. (3) Government Budget Allocation in The Directorate General of Water Resources (DGWR) is responsible for the implementation of water resources infrastructure development projects for MPW. The allocated annual budgets were Rp 28.1 trillion in 2008 and Rp 24.8 trillion in Around 30% of the total annual budget to MPW has been allocated to DGWR in 2008 and 2009 as shown in Figure % 4% 25 Trillion Rupiah % 6% 53% 56% 65% 65% Directorate General of Human Settlement (Cipta Karya) Directorate Genral of Highways (Bina Marga) Directorate Genral of Water Resources (SDA) 5 42% 38% 30% 30% Source: Director of Development Finance Allocation, BAPPENAS Figure Comparison of Budget Allocation in Ministry of Public Works in Figure shows the distribution of allocated budget to DGWR in the period. More than 40% of the budget has been allotted to irrigation development and management, followed by flood control and coastal protection (26-31%), and water resources development and management (23-29%). 9 Trillion Rupiah % 46% 30% 42% 26% 28% 51% 43% Flood Control & Coastal Protection Irrigation Development & Management Water Resources Development & Management % 28% 23% 29% Source: Director of Development Finance Allocation, BAPPENAS Figure Comparison of Budget Allocation in Directorate General of Water Resources, Ministry of Public Works in Republic of Indonesia March 2010

127 4.4.2 Progress of Development (1) Progress of Major Activities under the Current RPJM Various efforts for water resources infrastructure development have been undertaken to support the national and regional economic growth. Table presents the progress of major activities achieved as of May 2008 under the current RPJM as well as the expected achievement until Table Progress of Major Activities and Expected Achievements under the Current RPJM Category Activity / Target for Achieved as of Estimated Indicator Achievement by Water Construction of reservoir 11 reservoirs 9 reservoirs 11 reservoirs (100%) resources and pond 350 ponds 431 ponds 443 ponds (127%) development, management, and conservation O&M of reservoir 121 reservoirs 119 reservoirs 121 reservoirs (100%) 2. Irrigation Surface Development/ development, irrigation improvement 560,000 ha 453,979 ha 521,619 ha (93%) and system Rehabilitation 1,516,748 ha 1,321,901 ha 1,495,396 ha (99%) management O&M 2,100,000 ha 2,039,336 ha 2,091,528 ha (100%) Ground Development/ water improvement 6,000 ha 5,373 ha 7,921 ha (132%) irrigation Rehabilitation 5,350 ha 5,916 ha 8,949 ha (167%) system O&M 8,000 ha 2,780 ha 3,000 ha (38%) Swamp Rehabilitation develop improvement 800,000 ha 820,598 ha 1,015,206 ha (127%) ment O&M 1,100,000 ha 451,291 ha 637,954 ha (58%) 3. Raw water Construction of water supply and supply channel 7 m 3 /s 8.52 m 3 /s m 3 /s (181%) management Rehabilitation of water 241 units 153 units 163 units (67%) supply channel Construction of weir and pond 441 units 66 units 100 units (23%) Rehabilitation of weir and 449 units 58 units 68 units (15%) pond 4. Flood Installation of FFWS 10 systems 9 systems 10 systems (100%) control and 10-year flood protection 10,000 ha 9,306 ha 12,806 ha (128%) coastal 1,250 km km 1,013 km (81%) protection O&M of river 1,500 km 225 km 225 km (15%) Coastal protection 250 km km km (60%) 5. Institutional reform Improvement of coordination among institution - Government Regulation No.20/2006 regarding Irrigation - Government Regulation No.42/2008 regarding Water Resources Management - Government Regulation No.43/2008 regarding Groundwater - Presidential Decree No.12/2008 regarding Water Resources Council - Ministerial Regulations No.30/2007 regarding Participatory Irrigation - Ministerial Regulations No.31/2007 regarding Irrigation Commission Guideline Source: Concept Strategic Plan Water Resources , DGWR, MPW, May 2009 Republic of Indonesia March 2010

128 (2) Institutional Strengthening and Policy Reform in Water Resources Sector The new Water Resources Law No.7/2004 introduced major changes to the legal and institutional framework for water resources management, e.g., new paradigms such as regional autonomy, decentralization and state revenue sharing, establishment of a National Water Resources Council (NWRC), an inter-governmental coordination framework headed by the NWRC, stakeholder participation in policy-making, private sector involvement in water resources management, and management and empowerment of beneficiaries (especially farmers). From this new law, some 35 government regulations concerning water resources management WRM are required to be promulgated. To date, several government regulations listed in Table were completed under the new law. This revision was included in the program for the reform of institutions and administrative aspects in the current RPJM Some important stipulations of the new Water Resources Law No.7/2004 are: i) Control of water resources shall be carried out by the central government and/or regional government while recognizing the rights possessed by local traditional communities and similar rights, as long as such rights are not conflicting with national interests and the laws and regulations (Article 6, Clause 2). ii) No license is needed for water utilized for private or irrigation needs (Article 8, Clause 1). iii) Surface and groundwater resources management shall be based on river basins, with integration between surface and groundwater (Articles 11 and 12). iv) Statement of WRM responsibilities of central, provincial, district and village government for river basins within and across their boundaries (Articles 14 to17). v) Financing WRM activities and sources of finance (Articles 77 to 80). vi) Cross-sectoral and cross-regional coordination of WRM shall be made by water resources councils at national, provincial, district and river basin level (Articles 85 to 87). vii) Criminal penalties up to Rp 1.5 billion and nine years imprisonment are specified for infringement of this law (Articles 94 to 96). The main points of some implementing regulations at the back of the new Water Resources Law No.7/2004 are discussed briefly below. 1) Establishment of New River Basin Management Organization Under the national institutional reform framework above, the MPW established a technical implementation unit (UPT) as its new river basin management organization at the state level. This UPT is called Balai Besar and Balai Wilayah Sungai (Water Resources Management Office), instituted under the Ministerial Regulation No.11A/PRT/M/2006. This regulation specified a total of 133 river basin groups (Wilayah Sungai) all over Indonesia. These are classified into 5 international groups, 27 inter-provincial groups, 37 national strategic river groups, 51 river groups crossing local government jurisdictions, and 13 river groups within the city boundaries. Out of these, 69 river basin groups are directly controlled and managed by UPT. These comprise five Republic of Indonesia March 2010

129 river basins that include those within the international border, 27 inter-province river basins, and 37 national strategic river basins. Along this line, a total of 30 UPTs have been established, comprising 11 offices of Balai Besar and 19 offices of Balai all over the country. The remaining river basins are being managed by regional governments. The new Balai Besar and Balai undertake the works related to both water resources development and management, and operation and maintenance (O&M). The necessary budget to operate the Balai Besar and Balai is obtained from the national budget (APBN). 2) Establishment of the National Water Resources Council (NWRC) WRM requires for coordination regarding water use, control and conservation among various stakeholders. As a legal ground of the coordination entity for WRM, the Presidential Decree No.12/2008 establishing the NWRC was issued in February The NWRC have the tasks of: i) preparing and formulating national policy and strategy on WRM; ii) deciding and providing options for classification of groundwater basins and river areas; iii) monitoring and evaluating groundwater basins and river areas; and iv) preparing and formulating hydro-geological, and hydro-meteorological information system management policies in consultation with the related institutions for each issue. This Presidential Decree No.12/2008 stipulates the organizational structure and membership of the NWRC. The chairman of the NWRC shall be the Coordinating Minister for Economic Affairs, and the executive chairman shall be the Minister of Public Works. The membership shall come not only from governments, consisting of 14 ministers, two agencies and local governments, but also 11 NGOs. 3) Government Regulation No.42/2008 regarding Water Resources Management This government regulation stipulates the manner of planning, implementing, monitoring and evaluating water resources conservation, water resources development and water allocation in a comprehensive manner. The regulation covers four major policy directions: i) definition of WRM; ii) policy and guideline for WRM; iii) provision of river areas, watersheds, water quality management, water sources use zones, water allocation, water resources facility, water resources development, climate change and water resources business; and iv) function of central government, regional governments, and other agencies, and function of coordination forums. (3) Formulation of Regulations in Relation to Irrigation Sector 1) Government Regulation No.20/2006 regarding Irrigation For full implementation of the new Water Resources Law No.7/2004 in the irrigation sector, Government Regulation No.20/2006 was enacted with the main contents summarized hereunder: (a) Responsibilities of the central, provincial and district/city government and water users association (WUA) for the development and management of irrigation system are clearly defined based on the size of irrigation system and its facility level as follows: Republic of Indonesia March 2010

130 Table Responsibility of Development and Management of Irrigation System Work Category of Irrigation System Main and secondary Tertiary irrigation system system Development Inter-state, inter provinces and national Central government WUA of irrigation system strategic irrigation system Inter district irrigation system Provincial government WUA District/city region District / city WUA Management More than 3,000 ha, inter provinces and Central government WUA of irrigation system national strategic irrigation system 1,000 ha to 3,000 ha or inter district Provincial government WUA irrigation system District/city region District/city WUA Source: Government Regulation No.20/2006 regarding Irrigation (b) Irrigation commission shall be established to realize the integrity of management of the irrigation system in district/city, province or inter-province. (c) Farmers participation in irrigation system development and management is more emphasized in all stages such as drawing up of initial ideas/plan, involvement in decision making and implementation of construction, improvement, rehabilitation, and O&M of irrigation systems. (d) Necessity of empowerment of district/city government and WUA is raised, and the roles of each stakeholder are defined. (e) The process management of irrigation assets and the roles of each stakeholder are defined. 2) Ministerial Regulations To implement the Government Regulation No.20/2006 in the operation level, the following guidelines were also formulated: (a) Ministerial Regulation of Public Works No.38/2006 regarding de-concentration and co-administration; (b) Ministerial Regulation of Public Works No.30/2007 regarding Guidelines for Participatory Irrigation System Management and Development; defining farmer society participation in the development and management of irrigation systems, rules and participation procedure, and monitoring and evaluation; (c) Ministerial Regulation of Public Works No.31/2007 regarding Guidelines for Irrigation Commission; defining the general rules of the commission, scope of arrangement, positions/works/tasks and functions, organization composition/membership and administration, election procedure, work connection, and financing; (d) Ministerial Regulation of Public Works No.32/2007 regarding Guidelines for O&M of Irrigation Systems; defining the general rules with operation and maintenance manuals for irrigation system; and (e) Ministerial Regulation of Public Works No.33/2007 regarding Guidelines for Empowerment of Water Users Associations (P3A), Federation of Water Users Association (GP3A), and Central of Water Users Association (IP3A); defining the formation of water users association, membership and structure of the organization, Republic of Indonesia March 2010

131 working area, work and functional relationships, improvement, financing, and monitoring and evaluation Remaining Issues (1) Key Remaining Issues for Next RPJM According to the draft concept of the next RPJM , BAPPENAS addressed the following remaining issues based on the evaluation on performance of the current RPJM : i) Decreasing function and sustainability of water resources capacity; ii) Decreasing capacity of water supply sources; iii) Non-optimal level of irrigation service networks; iv) Increasing potential of water conflicts; v) Increasing threat of flooding and droughts; vi) Spreading coastal abrasion; and vii) Weakness of coordination and function of institutional management of water resources. Furthermore, the draft Renstra prepared by DGWR addressed the strategic issues on water resources management in detail through the evaluation of the current Renstra : i) The level of watershed damage becomes more severe, threatening the preservation of reservoirs, lakes, and other sources of water, and increasing the risks on hydro power. ii) The irrigation and swamp network services, which are less optimized for irrigation water requirement, and the limited available quantity and quality of raw water to serve as drinking water in border areas and small islands have to be developed. iii) Irrigation network function has to be developed and improved due to the increasing irrigation water demand and the swamps, in order to support the national food security and provide adequate domestic water supply. iv) Problems on O&M of water resources infrastructure require attention. v) Paddy land conversion in Java has increased significantly. vi) Weak coordination among institutions and the autonomous regions resulted in inefficient management of water resources. vii) Data and information system management is still limited. viii) Global climate change impact is more intensive. ix) Abrasion on the coastal zone becomes a threat to the small islands and affects the boundary of the country and Exclusive Economic Zone (EEZ). In addition to the above issues, DGWR emphasized the following problems in the implementation of the current Renstra : i) Increased extra "burden" other than the activities of the current Renstra targets due to the impact of natural disasters that occurred in (Natural disaster occurred in December 2004 in Aceh and North Sumatra.) ii) The development of institutional management of water resources has not yet been completed. Republic of Indonesia March 2010

132 iii) The implementing institutions have weak capacity in executing water resources management and coordinative management. iv) Budget-based performance management has not been implemented effectively due to limited allocation of national budget. As mentioned in Sub-section (2), under the new Water Resources Law No.7/2004, some 35 government regulations were called for to expand, clarify and help in the implementation of the new law. At least 9 regulations were planned to be revised under the ongoing Renstra as the program of development of institutional management, aiming at realizing effective institutional management so that potential water conflicts can be controlled. The target regulations for revision are on irrigation, rivers, water resources management, financial management of water resources, water quality management, groundwater, corporatization of water resources management, PJT I and PJT II. Several regulations are still in various stages of preparation. The draft RPJM emphasizes that the new paradigms under the new Water Resources Law No.7/2004 requires some adjustment of the roles of respective government, private and community for the management of water resources infrastructures. There is still weakness in the coordination between institutions under the regional autonomy. The policy and commitment are not in harmony with each other and thus needed to be synchronized to manage the water resources. Community participation and awareness, which are basic requirements for the new paradigms, are still in the limited level. In this connection, increasing the institutional capacity in water resources management and community participation and empowerment (especially in the district/city level) should become key challenges for the next RPJM Together with the strategic issues discussed above, regional water-related issues by island, complicated flood control and coastal protection issues need to be addressed in the forthcoming Renstra and these are discussed in the succeeding items from (2) to (5) in this subsection. The remaining issues in the irrigation sector are also discussed in detail in Item (6). (2) Outstanding Regional Water-related Issues by Island The remaining issues mentioned above are not necessarily common to all the islands in Indonesia, including its locality. Due to unequal distribution of population (e.g. about 83% of Indonesia s population live in the two main islands of Java (57%) and Sumatra (26%)), varying topographical, geographical and climatic conditions, and different levels of economic development, associated water-related issues are different according to island. Table below summarizes the outstanding regional water-related issues of the main islands. Republic of Indonesia March 2010

133 Island Sumatra 48 Java Kalimantan 18 Sulawesi Nusa Tenggara and Bali Table Outstanding Regional Water-related Issues by Island No. of River Major Issues Basin (WS) Illegal (uncontrolled) logging and deforestation, critical catchment (all provinces) Deteriorated irrigation infrastructure (all provinces) Water conflict between irrigation and DMI (Medan, Padang) Flooding (all provinces) Illegal (uncontrolled) logging and deforestation, critical catchment (all provinces) Degraded water environment (all provinces) Severe water stress condition, increasing water conflicts (all provinces) 22 Deteriorated irrigation infrastructure (all provinces) Flooding (all provinces) Insufficient coordination/management of water resources (all provinces) Illegal (uncontrolled) logging and deforestation, critical catchment (all provinces) Inter-community conflicts (indigenous people and recent incomers) Deteriorated irrigation and swamp schemes due to poor maintenance (all provinces) Poor water supply and sanitation coverage (well behind the MDG targets) Deteriorated irrigation and drainage infrastructure (all provinces) 23 Severe water stress condition, increasing water conflicts (South Sulawesi) Flooding (all provinces) Deforestation of catchment (all provinces) Deteriorated irrigation and swamp infrastructure (all provinces) 9 Severe water stress condition, increasing water conflicts (West Nusa Tenggara, Bali) Poor water supply and sanitation coverage (well behind the MDG targets) Deteriorated irrigation infrastructure (all provinces) 12 Maluku and Papua Source: Indonesia's Water Sector Profile (Draft), BAPPENAS, 2008 (3) Complicated Issues to be highlighted It should be emphasized that solutions for the following serious issues of the current RPJM should be highlighted to formulate the next RPJM: i) Worsening watershed (water resources) deterioration mainly in Java, Sumatra, Kalimantan, Sulawesi, and Nusa Tenggara ii) Progressing environmental degradation (seriously polluted rivers in Java) iii) Serious dilapidation of existing water resources infrastructure (mainly irrigation facilities all over Indonesia) Watershed degradation is progressing due to illegal and uncontrolled loggings, attributed to poverty and subsistence agriculture. This resulted in increased occurrences of soil erosions and decreased water holding capacity of the upper catchment area. As a consequence, the following issues are highlighted: i) increase of reservoir sedimentation, ii) decrease of water supply capacity, iii) increase of flood peak, iv) decrease of drought discharge and its prolonged duration, etc. Watershed deterioration is a complicated issue that requires inter-sectoral and inter-regional approach to determine solutions. This issue could not be resolved by MPW alone, the leading agency on water resources infrastructure development. It is, therefore, recommended to emphasize in the Policy Direction and Strategy that a socially-complicated issue such as watershed deterioration shall be resolved through the coordinated implementation of related ministries and regional governments, with the provision of top-level coordination of policies and strategies in the water resources sector. In many urban areas in Java, the aquatic environment has deteriorated due to over-exploitation of water resources and their contamination. This is due to domestic, municipal, agricultural and industrial Republic of Indonesia March 2010

134 wastes, which are often discharged without proper treatment. This is also due to the exceeding capacity of self-purification of rivers which also occur frequently. All these are effects of population growth and concentration, urbanization and industrialization. As a result, many urban rivers and aquifers have lost their potentials as sources of water with adequate quality for various uses, consequently causing water conflicts on water stress situation. Besides more strict water quality management and pollution control, education and empowerment of inhabitants is necessary to make them understand that care and attention to the water environment is everyone s responsibility. The solution for the environmental degradation issue also requires the same coordinated implementation approaches applied to watershed deterioration issue. Serious dilapidation of existing water resources infrastructure (mainly irrigation facilities) is a national concern due mainly to poor budget for O&M. Damaged facilities exist and have not been rehabilitated, repaired or replaced. This is likely to cause significant adverse effects in view of water resources management, namely: i) shortened lifetime of facilities, ii) reduction of water supply capacity, iii) insufficient (non-optimal) water use, and iv) water conflicts among water users. All the existing water resources infrastructures, as public utilities, are supposed to support human lives and economic activities. Thus, continuous management for these facilities is indispensable to serve their function as important water source/water distribution facilities as well as flood mitigation for a wide range of beneficiaries. (4) Flood Control and Mitigation Flooding event occurs regularly throughout Indonesia. Figure shows the distribution of events of natural disasters in in the country. As highlighted in Figure 4.4.3, a flood event has the largest and greatest impact on life and property amongst natural disasters. Out of 1,155 events in total, the number of flood events was 408 in three years from 2002 to Flooding damages are particularly serious in major urban cities. Urban /building Fire 20% Earthquake /Tsunami 5% Tidal 1% Drought 2% Volcanic eruption 2% Flood 35% Land/forest fire and Haze 5% Storm 10% Landslides 15% Flood and Landslides 5% Source: Natural Disater Data Book, Asian Disater Reduction Center Figure Distribution of Natural Disaster Events in Indonesia in Republic of Indonesia March 2010

135 As shown in Figure below, the number of flood events in Indonesia has been increasing every year. Flooding events might be increasing as a result of climate change but these are also due to urbanization in major cities. Particularly, serious flooding was experienced in Jakarta continuously in both January and February 2002 within living memory, where more than 300,000 people had to be evacuated from deeply submerged low-lying areas of Jakarta. Furthermore, similar serious widespread flooding occurred over Central Java in December These serious flooding events highlighted the slowness of progress on the planned flood control measures. NUMBER OF FLOODS OCCURRED IN INDONESIA Number of flood events / / / / / / /2008 Year Source: Water Resources Policy and Strategy on Adaptation to Climate Change, DGWR, MPW, January 2009 Figure Number of Flood Events in Recent Years in Indonesia Flood control works have been implemented in the current RPJM showing some progress; e.g. installation of 10 FFWS systems and a 978-km long river improvement for protecting 15,650 ha of flood prone areas from 10-year floods. In Java and Sumatra, large areas of floodplains have been protected by dikes. However, they are prone to occasional overtopping and breaching as a consequence of unpredictable extraordinary floods. It might be concluded that the current flood control and mitigation measures being implemented are still below satisfactory level, requiring flood management approach with combined use of structural (flood control infrastructure) and non-structural flood prevention measures. The flood management approach aims at reducing/minimizing economic and social losses from floods. Conceivable non-structural measures are: i) Early alert system such as FFWS with provision of improved communication and dissemination system and community awareness programs; ii) Emergency flood shelters and evacuation buildings; iii) Flood hazard mapping and risk mapping with evacuation system; iv) Conservation of water resources by increasing the water holding capacity in upper basin (soil and water conservation by watershed conservation); and v) Conservation of wetlands and low-lying areas as temporary flood storage areas (flood retarding areas). Republic of Indonesia March 2010

136 The following conventional flood and disaster control works (structural measures) shall also be continued and further strengthened: i) Development of flood and sediment/mud control facilities; ii) Rehabilitation of flood and sediment/mud control facilities; and iii) O&M of flood and sediment/mud control facilities. (5) Coastal Protection Indonesia is the largest archipelagic country in the world, covering 8 million km 2 of the earth s surface with a total land area of around 2 million km 2. The coastline runs 81,000 km with around 17,508 islands within the archipelago. It was reported 1 that in 1997, about 2 million people live in coastal areas with elevation of between 0 and 2 m above sea level. Many industries also operate in these coastal areas such as oil and gas exploration, transportation, fisheries (approximately 400,000 ha ponds), settlements, agriculture and tourism. These economic activities contribute to about 25% of GDP and absorb about 15% of employment. Coastal abrasion has threatened the productive lands and tourist areas. Coastal abrasion in various border regions might result in the shifting of territorial border lines. The government recognizes that safeguarding of coastal lines has strategic importance to guard the territorial integrity of NKRI (Unity State of the Republic of Indonesia) and EEZ (Exclusive Economic Zone, totally 1.9 million km 2 ) of Indonesia. More than 30,000 km of coastline has been damaged due to abrasion. This corresponds to around 37% of the national coastline. Although no precise data and information are available at this moment, progressing degradation of coastal areas is evident in the form of: i) Loss of mangrove forests; ii) Destruction of coral reefs; iii) Depletion of fish stocks; and iv) Shoreline erosion and regression of seashore. The target length for coastal protection works in the current RPJM was 250 km. However, the estimated achievement by 2009 would only be 156 km. The allocated budget thereof was only around 5% of the total budget of DGWR in It was reported that the total assets of the existing coastal protection facilities in Indonesia as of 2002 were 8,000 m long jetties, 15,000 m long coastal protections and 24,000m long wave breakers 2. The rapid loss of mangrove cover and coral reefs would result to accelerated shoreline erosion, more saline-water intrusion into freshwater aquifers, and loss of key fish and prawn nursery sites. Furthermore, due to climate changes, an increase in sea level would result in devastating impact to the coastal areas on socio-economic activities and sustainable development. In this respect, increasing the 1 Summary for Policymakers, Climate Variability and Climate Changes, and Their Implication in Indonesia (2007), Ministry of Environment and Ministry of Public Works 2 Proceeding of Workshop on Asset Management for Hydraulic Infrastructure, 2002, DPU and BAPPENAS Republic of Indonesia March 2010

137 budget for coastal protection and rehabilitation works should be addressed as one of the key remaining issues for the next RPJM (6) Remaining Issues in the Irrigation Sector 1) Trend of International Rice Price and Realization of Food Security in Indonesia In 2008, due to the increased production of bio-ethanol using food grain (e.g. maize) in the world and the tremendous forward buying of rice in the international market, the price of rice rapidly increased. The following graph presents the price fluctuation of rice at the Thailand international market, which reached to US$1,000/t in April 2008 from US$300 /t in At present, although the price slightly declined, it is still considered to be at a high level (US$600/t) Thailand 5% Parboiled Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 US$/metric ton Source: Rice Outlook Report, 2009, United States Department of Agriculture (USDA) Figure International Price of Rice Consequently, it was reported that in the Philippines, the largest rice importing country, its government encountered difficulties in acquiring the required amount of rice. It was also reported that some of the Middle Eastern and developed countries, which rely on imported food from abroad, started to acquire land outside their boundaries for their production in order to secure future food supply. Indonesia had also imported a large amount of rice from 1995 to 2003 as shown in the following figure. However, in these several years, it was observed that the imported amount has decreased as a result of great efforts to increase paddy production. Republic of Indonesia March 2010

138 Total Production and Import of Paddy in Indonesia Paddy Quantity(thousand ton 60,000 58,000 56,000 54,000 52,000 50,000 48,000 46,000 44,000 42,000 Import(equivalent paddy) Production(Paddy) 40, Source: FAOSTAT Figure Paddy Production and Import Volume of Indonesia As it is forecasted that there will be a risk of food shortage all over the world in the future, increase and stabilization of paddy production as a main food crop should be given high priority to ensure safety, security and peace in the country. Under this circumstance, irrigation infrastructure development is required to be planned based on the projection of the future food balance in Indonesia, in cooperation with its related ministries. 2) Reduction of Irrigation Paddy Fields due to Conversion of Lands into Urban and Industrial Areas One of the highlighted issues to be given high priority is the reduction of irrigation paddy fields, especially in Java, due to conversion of lands into urban and industrial areas. Although it was also noted as a key issue in the current RPJM , reduction of irrigable lands is continuing, according to the statistical data of BPS as shown in the following table. Republic of Indonesia March 2010

139 Table Area of Irrigation Paddy Field and Non Irrigation Paddy Field by Island (Unit 1,000 ha) Island Category Unit Change Average since 2000 per year Irrigation 1,000 ha 2,668 2,659 2,616 2,624 2,544 2, Java-Bali Non-Irrigaton 1,000 ha Paddy production 1,000 ton 29,947 29,102 29,417 28,961 30,551 31,306 1, Irrigation 1,000 ha 1,060 1,054 1,034 1,289 1,127 1, Sumatra Non-Irrigaton 1,000 ha 1,052 1,044 1,070 1,182 1,213 1, Paddy production 1,000 ton 11,819 11,287 11,542 12,136 12,675 13,371 1, Irrigation 1,000 ha Kalimantan Non-Irrigaton 1,000 ha Paddy production 1,000 ton 3,000 3,074 3,169 3,358 3,614 4,309 1, Irrigation 1,000 ha Nusa Tenggara Non-Irrigaton 1,000 ha Paddy production 1,000 ton 1,950 1,907 1,838 1,932 1,829 2, Irrigation 1,000 ha Sulawesi Non-Irrigaton 1,000 ha Paddy production 1,000 ton 5,065 4,983 5,438 5,602 5,301 5, Irrigation 1,000 ha 2,201 2,207 2,169 2,616 2,208 2, Outer Java total *1) Non-Irrigaton 1,000 ha 2,157 2,148 2,181 2,368 2,362 2, Paddy production 1,000 ton 21,834 21,251 21,987 23,028 23,419 25,636 3, Irrigation 1,000 ha 4,869 4,867 4,785 5,240 4,753 4, Indonesia Total *1) Non-Irrigaton 1,000 ha 2,919 2,913 2,964 3,160 3,133 3, Paddy production 1,000 ton 51,781 50,353 51,404 51,989 53,970 56,942 5, Note: *1): Maluku and Papua are not included due to insufficient data Source: Area of Irrigation and Non Irrigation Paddy Field: Agricultural Survey, Land Area by Utilization in Indonesia, BPS Paddy production: Statistical year book, BPS The productivity of paddy in Java-Bali is higher than those in outer Java. The proportion of irrigated paddy fields is 77%, which is higher than those in outer Java (48%). The yield of paddy and cropping intensity are also at high levels, considering that farmers have extensive experience in paddy cultivation. Hence, Java is the main area for paddy production in the country. This means that reducing the paddy fields in Java will cause considerable impact in paddy production at the national level. The following table summarizes the paddy production, harvested area, yield, cropping intensity, and annual production per wetland, by island. Based on the difference of the production per wetland area, reduction of 1 ha of paddy field in Java will require an increase of around 1.7 ha (9.45/5.66) of paddy field in outer Java, to maintain the same amount of production. Table Paddy Production and Yield by Island of 2007 Paddy production Harvested area Average yield Wetland area Average cropping intensity Production per area of wetland Island (1,000 ton) (1,000 ha) (ton/ha) (ha) (%) (ton/ha) a b a/b c b/c x 100 a/c Java & Bali 31,306 5, , % 9.45 Outer Java total 25,851 6, , % 5.66 Sumatra 13,371 3, , % 6.06 Kalimantan 4,309 1, , % 4.23 Nusa Tenggara 2, % 5.75 Sulawesi 5,924 1, % 6.44 Maluku & Papua % 3.02 Indonesia Total 57,157 12, , % 7.25 Source: Statistical Year Book 2007, BPS In case that decrease of paddy field in Java-Bali will continue at the rate of 18,000 ha (irrigated and non-irrigated paddy field) every year as presented in Table 4.4.4, production of Republic of Indonesia March 2010

140 170 thousand ton of paddy will consequently decrease every year. This implies that an increase of around 30,000 ha of paddy field in outer Java might be required annually in order to supplement the corresponding decrease of paddy production in Java-Bali. In terms of national food security, it is vital to increase paddy production and harvested area to meet the demands of population growth. However, considering the accelerated national economic growth, expansion of urban and industrial areas in Java which cannot be restricted, the following measures are recommended: i) It is essential to specify highly productive areas and strategically important agricultural areas in the spatial plan. Formulation of law or regulation is also necessary to avoid uncontrolled development of urban and industrial areas. Hence, the government plays the role of regulating the conversion of productive agricultural lands. ii) To meet the increase in future food demands, required irrigation system for increasing the harvested area will have to be developed and extended outside of Java. iii) It is evident that land conversion has occurred since the land value became higher than that of agricultural production. Therefore, cultivation of high-value crops in suburban areas should be promoted. 3) Non-optimal use of existing irrigation facilities The issue related to non-optimization of irrigation facilities was also raised in the current RPJM However, it remains unresolved and should still be considered in the next RPJM. According to the data and reports from DGWR, MPW, out of the scheduled irrigation area (7.47 million ha), 0.24 million ha (3%) of irrigation scheme has not been completed, while 1.8 million ha (24%) is not functioning well. However, these estimated areas were not based on detailed survey, and are still unclear at present. Thus, MPW plans to initiate an inventory survey in 2009 to obtain more realistic figures. As one of the methods in measuring the functionality of the existing irrigation schemes, the following table presents the comparison of scheduled irrigation areas from MPW, and irrigation areas from the BPS data. Table Comparison of Planned Irrigation Area and Irrigation Area from BPS Statistical Data (2007) Island Irrigation Area (Planned) (1,000ha) Irrigation Area (from BPS data) (1,000ha) Projected Ratio of Functionality of Irrigation Scheme Java & Bali 3,300 2,543 77% Outer Java total 4,169 2,218 53% Sumatra 1,989 1,041 52% Kalimantan % Nusa Tenggara % Sulawesi 1, % Maluku & Papua % Indonesia Total 7,470 4,760 64% Source: 1) Planned irrigation area: Ministry of Public Works, DGWR (2007) 2): Irrigation Area: Statistical Year Book (2007), BPS Republic of Indonesia March 2010

141 According to the above information, about 36% of the area is not functioning well. The following are the main reasons for the reduced irrigation functionalities: i) Insufficient and improper O&M - Reduction of canal flow capacity due to sedimentation and erosion of canal slope, especially main canal - Difficulty of proper water management due to deterioration of gates and structures ii) Improper water management - Shortage of water in downstream area due to water overuse in the upstream area, caused by improper water management iii) Deterioration of facilities due to aging - Deterioration of facilities exceeding the durability period resulting in extensive maintenance works iv) Limited water source for irrigation in river - Shortage of water resource for irrigation due to the deterioration of upstream watershed and increase of domestic, municipal, and industry (DMI) water demand Since the reasons for lowering the facilities functionalities and the degree of deterioration vary for each irrigation system, it is urgently required to collect actual information from the field and to establish a relevant database. Based on the collected actual information, it becomes possible to formulate a more effective and efficient rehabilitation program through the application of asset management, in terms of reducing life cycle costs. As described above, the recommended actions for the improvement of utilization of the existing irrigation systems are summarized below: i) Implementation of inventory survey of irrigation facilities and performance. - Type and quantity of facilities - Functionality of facilities and performance of irrigation system - Identification of main reasons for decreased functionality - Establishment of database ii) Formulation of rehabilitation program and prioritization of system to be rehabilitated, reflecting the asset management concept iii) Implementation of rehabilitation of irrigation system. Republic of Indonesia March 2010

142 4) Strengthening of institutions for O&M As described in Item (3) of Sub-section 4.4.2, the government regulation on irrigation defines the demarcations of roles of each stakeholder, as summarized below: Table Responsibility of Management of Irrigation System No. of Total Main & secondary canal and Tertiary canal and Irrigation Irrigation facilities facilities Category System in Area Responsible Responsible Fund Fund 2008 (1,000ha) office More than 3,000 ha or 241 2,851 Central Balai / Balai crossing provincial WUA (1%) (38%) government Besar boundary WUA 1,000ha to 3,000 ha or 1,109 1,423 Provincial Dinas crossing district boundary (3%) (19%) government Province WUA WUA Less than 1,000 ha 31,860 3,196 Dinas Kabupaten (96%) (43%) Kabupaten WUA WUA Total 33,210 7,470 (100%) (100%) Source: Government Regulation of the Republic of Indonesia No.20/2006 regarding irrigation No. of irrigation system and irrigation area: Ministry of Public Works, DGWR, 2008 A series of guidelines was also prepared in 2007 to fully implement the government regulation,. However, it is still observed that there are problems to be addressed, as listed below: 1) Weak capacity of government staff both in provincial government and Kabupaten and WUAs on O&M for irrigation facilities; 2) The roles and responsibilities under the new regulations are not fully understood by the O&M staff of government, O&M institutions, and WUAs staff; and 3) Monitoring and evaluation system on O&M performance is not established. Since the institutional framework on the management of irrigation schemes is new, the actual implementation at the operational level seems to still be in the transition stage. For instance, an irrigation system serving more than 3,000 ha area should be managed by Balai office. However, regular O&M works in some systems were designated to either Dinas Province or Dinas Kabupaten, since the areas of responsibility of Balai office related to all irrigation systems are too large to manage, considering its limited staff. In addition, with a restricted budget, it seems the office had difficulties in implementing proper O&M. Participatory works by WUA have also met many challenges. According to the regulation, development of tertiary canals became the WUA s responsibilities. However, in some cases, the construction and management of tertiary canals were not completely implemented due to lack of funds and capacity. Hence, irrigation performance was not achieved as expected. As it is still in the transition period, a new institutional framework consisting of new laws, regulations, and guidelines should be transferred to local government staff through seminars or workshops. An appropriate O&M organization should be established at the operations level. Continuous capacity-building for local government staff and WUAs following the guidelines is also necessary to be executed. After implementation at the operational level, review of such guidelines and obtaining feedback are also required in order to further improve the institutional framework. Republic of Indonesia March 2010

143 It is also recommended that the relevant office on O&M issues at the central government should monitor and evaluate the annual O&M performance of every irrigation scheme, using performance indicators such as actual irrigated area against planned irrigation area or cropping intensity. Regular site inspection on evaluation of O&M performance is also effective to observe site condition and collect reliable information. 5) Reduction of Economic Gap and Increase Farmer s Income The following figure shows the comparison of GRDP per capita by island. It reveals that the GRDPs of Eastern Indonesia regions such as Nusa Tenggara and Sulawesi are relatively lower than the others. GRDP per Capita at Current Market Prices by Region of GRDP per Capita (million rupiahs) Oil & Gas (million rupiahs) without Oil & Gas (million rupiahs) Indonesia Average (14.1 million Rp.per capita) 0.0 Sumatra Java Kalimantan Bali and Nusa Tenggara Sulawesi Maluku and Papua Indonesia Source: Statistical Year Book 2008, BPS Figure GRDP per Capita at Current Market Prices by Island (2008) The economic gap between urban and rural areas is also determined. The following figure shows the percentage of people under poverty line by island (2008). Percentage of people under poverty line by Island of 2008 Percentage(%) 40% 35% 30% 25% 20% 15% 10% 5% 0% 16% 14% 12% 20% Urban Rural 11% 7% 21% 17% Sumatra Java Kalimantan Bali & Nusa Tenggara Source: Statistical Year Book 2008, BPS 19% 8% 8% Sulawesi 37% Maluku & Papua 12% 19% Indonesia Note: Poverty line in urban area is set at 204,896 rupiahs and the one in rural area is set at 161,831 rupiahs. Figure Percentage of People under Poverty Line by Island (2008) Republic of Indonesia March 2010

144 Figure shows that in Java and Sulawesi, the percentage in the rural area is almost double that in the urban areas. A high priority issue in Indonesia is the achievement of sustainable economic growth, driven by private investment. However, rapid development sustained by private sector is concentrated only in the urban areas. This has increased the economic gap between the urban and the rural areas. This situation could cause unstable livelihood, concentration of population in the urban areas, and expansion of slum areas as revealed from the experience of BRICs countries. Agriculture is the main economic activity in most rural areas, Hence, provision or rehabilitation of irrigation infrastructures to increase paddy production will contribute to regional economic development. According to the JICA Study Report The Study on Comprehensive Recovery Program of Irrigation Agriculture (2004), incremental net profit was estimated at US$350/ha in average through increase of paddy production as a result of the rehabilitation of the existing irrigation scheme. Therefore, the immediate implementation of irrigation development is highly required to increase farmer s income and contribute to poverty reduction. 6) Countermeasure for Water Conflict and Adaptation to Climate Change (a) Countermeasure for Water Conflict The agriculture sector is the dominant user of water (86% of the total demand). In Indonesia, there is an imbalance between demand and supply in terms of place and time. According to the analysis of availability and demand balance in the dry season, Java-Bali and Nusa Tenggara experience deficiency due to high demand and limited water resources, as shown in the following table: Table Water Balance During Dry Season Year 2003 and 2020 Availability Demand (x10 9 m 3 ) Island (x10 9 m 3 ) 2003 Balance 2020 Balance Sumatra Surplus 13.3 Surplus Java-Bali Deficit 44.1 Deficit Kalimantan Surplus 3.5 Surplus Nusa Tenggara Deficit 4.7 Deficit Sulawesi Surplus 9.7 Surplus Maluku Surplus 0.1 Surplus Papua Surplus 0.2 Surplus Source: Sub-Directorate of Hydrology, Ministry of Public Work (2003). It is expected that water demand for DMI in Java and Bali will continue to increase, thus, the following countermeasures are recommended: i) Modernization of irrigation facility to conserve water - Extension of concrete lining and improvement of irrigation facility to reduce conveyance loss - Installation of remote gate control system for integrated water management to minimize water management loss Republic of Indonesia March 2010

145 ii) Application of monitoring and evaluation system of water management to reduce water conveyance losses in the canal system iii) Construction and rehabilitation of reservoir (embung) to increase water storage capacity. (b) Adaptation to Climate Change The increase in temperature and change of rainfall pattern are observed to be the effects of climate change. Reports estimated that the rainfall pattern would change in terms of shifting of the rainy periods and more intense rainfall intensity, as shown in Figure This phenomenon is expected to cause serious drought in the future. For agriculture production, the following scenarios may consequently occur: Rainfall August December Future climate i) Decrease of yield in rainfed paddy field during rainy season; ii) Decrease of yield and harvested area in surface irrigation system during dry season; and iii) Decrease of yield in swampy area due to frequent flood during rainy season. Further detailed research and study are recommended to determine the change in rainfall pattern and its effects to agriculture production. At present, the following countermeasures are recommended. i) Extension of irrigation facilities to rainfed paddy field; ii) Construction of water storage facilities to be utilized for dry season irrigation; and iii) Construction of drainage canals, installation of drain pumps and construction of banks as protection from flooding. May Present climate Source: Climate Variability and Climate Change, and their Implication in Indonesia, Ministry of Environment and Ministry of Public Works, 2007 Figure Projected Rainfall Pattern in Indonesia Action Plan to Address the Issues (1) Competitiveness of Indonesia s Water Resources Infrastructure Figure shows the distribution of the world s fresh water resources, with Indonesia ranking 5 th in the distribution. Indonesia is thus rich in water resources in terms of availability. However, the water resources infrastructure development in Indonesia is still below satisfactory level due to uneven distribution of precipitation and water resources, and its monsoon climate wherein the wet season brings severe floods while the dry season causes water shortage. This has caused various water-related problems as discussed in Sub-section above. Republic of Indonesia March 2010

146 Distribution of World's Water Source: Dams and Development, World Commission on Dams, 2000 Figure Distribution of the World s Water The objective of this sub-section is to evaluate the current status of water resources infrastructure development in Indonesia. Several relevant indicators are compared to those with other countries in order to evaluate the country s performance on water resources infrastructure development. The countries considered are the ASEAN members including Cambodia, Malaysia, the Philippines, Thailand and Viet Nam, and BRICs members such as China and India. The adopted performance indicators are as follows: i) Proportion of water usage by sector as of 2000; ii) Available annual water resources per capita as of 2007; iii) Freshwater withdrawal ratio as of 2002; iv) Dam storage capacity per capita as of 1995; v) No. of large dams (higher than 15 m as of 1998; vi) Large dam density (No. of large dams per 1,000 km 2 ) as of 1998; and vii) Large dam density (No. of large dams per million persons) as of 1998 In this performance comparison, it should be noted that: The proportion of water usage by sector is only for comparison purposes without any ranking sequence; Available annual water resource is defined as the internal renewable water resources, comprising long-term average annual flow of rivers and recharge of aquifers generated from precipitation; and Freshwater withdrawal is the sum of surface water withdrawal and groundwater withdrawal. Freshwater withdrawal ratio is determined from the freshwater withdrawal divided by the internal renewable water resource. Figure presents the comparison of water use ratios by sector. Agriculture is the dominant sector in all the selected countries. It should be noted that the water use ratio of agricultural sector in Indonesia is 86%. Republic of Indonesia March 2010

147 Proportion of Water Usage by Sector (2000) 0% 20% 40% 60% 80% 100% 1. Indonesia 2. Cambodia 86% 8% 98% 5% 1% 0% 3. Malaysia 62% 17% 21% 4. Philippines 5. Thailand 74% 95% 17% 9% 2% 2% Agriculture Municipal Industrial 6. Vietnam 68% 8% 24% 7. China 68% 7% 26% 8. India 91% 8% 1% 9. Japan 62% 20% 18% Source: AQUASTAT, FAO Figure Comparison of Proportion of Water Usage by Sector The results of the analysis of competitiveness of Indonesia are graphically shown in Figure and summarized in Table Annual Water Resources Per Capita (m3/year) Available Annual Water Resources Per Capita as of ,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Indonesia Cambodia Malaysia Philippines Thailand Viet Nam China India Withdrawal Ratio (%) Indonesia Freshwater Withdrawal Ratio as of 2002 Cambodia Malaysia Philippines Thailand Viet Nam China India Dam Storage Capacity Per Capita as of 1995 No. of Large Dams (higher than 15m) as of 1998 Capacity Per Capita (m3/person) 1,500 1,250 1, N.A. 0 N.A. Indonesia Cambodia Malaysia Philippines N.A. Thailand Viet Nam China India No. of Dam 25,000 20,000 15,000 10,000 5,000 0 Indonesia Cambodia Malaysia Philippines Viet Nam Thailand China India Republic of Indonesia March 2010

148 Dam Density (No. of dam/1,000 km2) Large Dam Density (No. of dams/1,000 km2) as of Indonesia Cambodia Malaysia Philippines Viet Nam Thailand China India Dam Density (No. of dam/million person) Large Dam Density (No. of dams/million person) as of Indonesia Cambodia Malaysia Philippines Viet Nam Thailand China India Source: AQUASTAT, FAO and ICOLD Figure Comparison of Competitiveness of Indonesia by Several Indicators Table Summary of Indonesia s Performance on Water Resources Sector Indicator Indonesia Ranking i) Available annual water resources per capita 12,400 m 3 /year 3 out of 8 ii) Freshwater withdrawal ratio 3 % 6 out of 8 iii) Dam storage capacity per capita 69 m 3 /person 4 out of 5 iv) No. of large dams (higher than 15 m) 96 dams 4 out of 8 v) Large dam density (No. of large dams per 1,000 km 2 ) 0.05 dams/1,000 km 2 5 out of 8 vi) Large dam density (No. of large dams per million 0.47 dams/million person 5 out of 8 persons) Source: AQUASTAT, FAO and ICOLD The major findings and comments of the Study Team are as follows: i) As a whole, Indonesia is abundant in water resources. Since Indonesia has the largest population among ASEAN countries, its available annual water resources per capita is only around 12,400 m 3 /year as of This is lower if compared with those of Cambodia and Malaysia, with 33,537 m 3 /year and 22,211 m 3 /year, respectively. Furthermore, the water resources potential per capita varies from island to island due to uneven population distribution and climate conditions. It becomes less than 2,000 m 3 /year in Java Island, while it is more than 282,000 m 3 /year in Papua. It is readily conceivable that the highly populated Java Island is likely to become critical from the viewpoint of water demand and supply balance due to industrialization and urbanization. ii) The freshwater withdrawal ratio in Indonesia is as small as 3%. The ratio in Thailand, which is ahead of Indonesia in terms of upper middle income population, is as large as 21%. This low ratio comes from the fact that the developed dam storage capacity per capita in Thailand of 1,340 m 3 /person is considerably higher than the 69 m 3 /person in Indonesia. iii) Large dams have played a key role in water resources development and management for the people. Although there are 117 large dams (more than 15m high) in Indonesia as of 2004, indicators of dam densities in terms of area and population are 0.05 dams/1,000 km 2 and 0.47 dams/million persons. These values are far smaller compared Republic of Indonesia March 2010

149 with those in Malaysia (0.18 dams/1,000 km 2 and 2.66 dams/million persons) and Thailand (0.40 dams/1,000 km 2 and 3.33 dams/million persons). It should be noted that both indicators in Indonesia are almost seven to eight times less than those in Thailand. iv) It is said that water resources infrastructure is considered as a platform for economic growth. Considering that Indonesia is still below satisfactory level in terms of current status of infrastructure among ASEAN countries, accelerated water resources infrastructure development should be done immediately in many areas of the country. (2) Regional Policy Direction for Water Resources Infrastructure Development Water-related issues differ for every locality because of uneven distribution of population, varying climate conditions and different land and water uses as discussed in Sub-section The current RPJM does not state regional policy directions and strategies for water resources infrastructure development for a particular island or regency. Therefore, setting the policy direction and strategies for water resources infrastructure development and management based on particular regional issues is recommended for consideration in the subsequent RPJM Table presents the recommended regional policy direction by island. Table Proposed Regional Policy Direction Island Regional Policy Direction for Infrastructure Development Sumatra Java Kalimantan Sulawesi Nusa Tenggara and Bali Maluku and Papua Source: JICA Study Team Water resources protection (watershed management) Rehabilitation of deteriorated irrigation facilities (Efficient irrigation O&M program) Water allocation and conflict resolution in urban areas Flood management in view of adaptation of climate change Water resources protection (watershed management) Wastewater control and water quality management Strengthening of integrated water resources management (IWRM) by Balai Besar Rehabilitation of deteriorated irrigation facilities as well as other water resources infrastructure Flood management in view of adaptation of climate change Institutional strengthening of river basin management organizations Water resources protection (watershed management) Rehabilitation of deteriorated irrigation facilities (Efficient irrigation O&M program) Provision of affordable access to water in remote areas (MDG targets) Rehabilitation of deteriorated irrigation facilities (Efficient irrigation O&M program) Strengthening of integrated water resources management (IWRM) for water stress basins Flood management in view of adaptation of climate change Water resources protection (watershed management) Rehabilitation of deteriorated irrigation facilities (Efficient irrigation O&M program) Water resources development with the focus on increasing of water storage Raw water supply to remote areas Rehabilitation of deteriorated irrigation facilities (Efficient irrigation O&M program) (3) Budget Allocation for More Sufficient O&M Table presents the actual allocated budget for O&M activities in 2007 for DGWR of MPW. As shown, the total allocated budget for all the activities of DGWR in 2007 was around Rp 7.86 trillion, while the allocated budget for O&M activities was around Rp 0.96 trillion, representing only 12.2% of the total budget. Considering the fact that serious deterioration of the existing water resources Republic of Indonesia March 2010

150 infrastructures is a nationwide issue, the allocated budget for O&M activities seems insufficient. This can be attributed mainly to limited potential of human resources or budgetary constraints. Table Allocated O&M Budget of DGWR, MPW in 2007 No. Program Activities Target Actual Development and management of irrigation network, swamp and others Development, conservation and management of rivers and other water sources Flood control and coastal security O&M of irrigation network O&M of swamp irrigation network Optimum functioning of lake, reservoir, situ, and embung Budget ('000Rp) 1,895,253 ha 1,954, ,930, ,940 ha 459,541 57,939,843 Lake 12 nos 5,759, Reservoir 29 nos 11,409,308 Situ 19 nos 14,310, Embung 54 nos 11,819,735 Pos AWLR 200 nos 43 99,131,333 4 O&M of river 439 km ,144,627 Total 961,445,068 Source: Director of Development Finance Allocation, BAPPENAS All river and irrigation infrastructures are indispensable to ensure sustainable water supply for specific water users such as PDAM, DMI and farmers. Thus, higher priority of O&M should be given to these facilities. Generally, maintenance aims at rehabilitating the function of water-related facilities due to detected fatigue, deteriorated components and mechanical problems. In general, O&M cost consists of: i) operating costs, ii) maintenance costs, and iii) direct personnel costs. Although the available data on actual O&M funding is very limited, Table shows an experience of O&M funding of several projects in Canada. It is however unknown whether the percentage of O&M includes direct personnel cost or not. It is reasonably assumed that the required cost for O&M varies in the type of structure. Table O&M Funding in Canada Agency Percentage of Current Assets Department of Regional Economic O&M Percentages * Expansion, Saskatchewan PFRA Canada Roads 3% Bridges 1% Embankments 0.5% Outlet Works 1.0% Spillway 0.5% Canals 1.5% Pump Houses 1.0% Pumps 2.0% Publication Water Resources Development- O&M Percentages Planning, Engineering, and Economics Dam & Reservoir 0.1% By Professor Edward Kuiper 1965-Canada Intakes and Outlets 1.0% Hydro Plants 1.0% Undeveloped Canals 2.0% Lineal Canals 1.0% Irrigation Works 3.0% Bridges (Steel & Con) 3.0% Bridges (Wooden) 8.0% Gates 1.5% Some Aspects of Maintenance in Canadian O&M 3.0% Industry by Dr. George Petes, Canada Republic of Indonesia March 2010

151 Saskatchewan Water Corporation Canada 0.01% for very large multipurpose river infrastructure (reservoir) 2.0% for moderate-sized facilities (not asset renewal) Tennessee Valley Authority, 1993 O&M 0.38% (2 Billion US Dollars of Current Asset Value) Asset Renewal 0.24% Note: Source: *) These percentages are based on the asset value at the time of construction. Canadian International Development Agency/ Republic of Indonesia, Ministry of Public Works (An Integrated Program for the Development of Operation and Maintenance for Rivers in Indonesia), Final Report, July 1993 The comparison of direct O&M cost and current asset value of PJT1 is shown below. The actual O&M cost varies from 0.20% to 0.42% of the asset value. Table Direct O&M Cost and Current Asset Value of PJT1 (Unit: Rp. million) Year O&M Cost 8,665 13,782 16,056 Book Value of Total Assets of 971, , ,802 Dams and Weirs (a) Book Value of River Facilities 1,107,265 1,076,993 1,046,722 Total Assets Value 2,079,075 2,013,861 1,951,524 Asset Value in Current Price (b) 2,079,075 6,931,325 5,268,994 Ratio (%) (=(a)/(b)x100) Note: Current price of assets was derived from the asset value in 1997 minus depreciation and then adjusted by the yearly average of the Rupiah to US$ reported by IMF: these values are Rp. 2,904.4 in 1997, Rp. 10,013.6 in 1998 and Rp. 7,855.2 in Source: Comprehensive Development and Management Study for Bengawan Solo River Basin under Lower Solo River Improvement Project, Final Report, 2001 The required amount of O&M cost is conceived as one of the life cycle cost (LCC) of the related facilities, as shown in the equation: LCC = initial investment cost + O&M cost + replacement cost and scrap value. The cost required for O&M work includes the improvement/repair cost and routine operation and maintenance work cost. Therefore, the O&M cost depends on the soundness of the facilities and/or damage conditions. As seen in the above table, the ratio of O&M cost to asset value ranges between 0.3 and 0.4. Since the economic crisis in Indonesia in 1997/8, sufficient O&M cost has not been arranged and it is supposed that damages of the facilities have been accelerated. Considering the facts above, it is recommendable that the necessary annual O&M direct costs (excluding direct personnel cost) will be twice or three times the normal ratio, or at least 1% of the current value of the assets. The current asset value of the whole water resources infrastructure in Indonesia, estimated to be Rp trillion by DGWR at 2002 price level, is summarized below. Republic of Indonesia March 2010

152 Table Estimated Asset Value of Water Resources Infrastructure in Indonesia as of 2002 No. Infrastructure Component Asset Value (Rp. million) 1 Irrigation 273, 460,330 2 Dam, Rubber Dam, Embung 63,481,721 3 Flood Control and Coastal Erosion 9,209,425 4 Raw Water Supply 340,000 Total 346,491,476 Source: Proceeding of Workshop on Asset Management for Hydraulic Infrastructure, 2002, MPW and BAPPENAS Assuming the total asset value as of 2002 above is unchanged, the required annual budget for O&M activities in 2007 is estimated to be Rp trillion, applying 1% ratio. However, the allocated budget in 2007 was only about Rp trillion, which is equivalent to around 0.28% of the total asset value in The strengthening of the O&M framework with provision of significant increase in budget and the capacity building of human resources for O&M is recommended in the next RPJM The table below presents the total assets of the existing water resources infrastructure and facilities all over the country as of 2002: Republic of Indonesia March 2010

153 Table Assets of Water Resources Facilities in Indonesia as of 2002 No. Structure Total Nos. / Total Nos. No. Structure Length / Length I. IRRIGATION III. FLOOD CONTROL & COASTAL PROTECTION 1 Headworks and Pump 16,329 nos. 1 Dike 2,806 km Fixed-type weir 12,408 nos. Earth dike (more than 5m high) 541 km Gate-type weir 1,604 nos. Earth dike (less than 5m high) 2,130 km Pump 1,380 nos. Masonry dike (more than 5m high) 25 km Free intake 1,380 nos. Masonry dike (less than 5m high) 110 km 2 Irrigation Canal (Main and 37,388 km 2 Flood Control Valve 25 nos. Secondary) Discharge control more than 100 m 3 /s 15 nos. Discharge more than 10 m 3 /s 5,608 km Discharge control less than 100 m 3 /s 10 nos. Discharge less than 10 m 3 /s 31,780 km 3 Flood Canal and River Normalization 1,801 km 3 Drainage Canal and other Canal 23,301 km Flood canal (more than 100 m 3 /sec) 65 km 4 Canal Structures 213,337 nos. Flood canal (less than 100 m 3 /sec) 76 km Diversion Structure 75,840 nos. River normalization (more than 100 m 3 /s) 560 km Settling Basin 2,450 nos. River normalization (less than 100 m 3 /s) 1,100 km Siphon and Aqueduct 8,890 nos. 4 Drainage Pumping Station 25 nos. Bridge and Culvert 51,000 nos. Capacity (more than 5 m 3 /s) 5 nos. Other Structures 75,157 nos. Capacity (less than 5 m 3 /s) 20 nos. 5 Tertiary Canal System 5,299,351 ha 5 Flood Retarding Basin 10 nos. Technical System 3,408,400 ha Capacity (more than 100,000 m 3 ) 10 nos. Semi-Technical System 1,120,882 ha Capacity (more than 100,000 m 3 ) 0 nos. Non-Technical System 770,069 ha 6 Volcanic Mudflow and Sediment Control 402 nos. II. DAM, RUBBER DAM, and EMBUNG Check dam 377 nos. 1 Large Dam (height > 15m) 101 nos. Mudflow pocket 25 nos. Multi-purpose Rockfill and 15 nos. 7 Other River Facilities 21.6 km Earthfill Dam Concrete groin 2.5 km Single-purpose Rockfill and 64 nos. Masonry groin 5.6 km Earthfill Dam Strengthening of dike 13.5 km Concrete Gravity Dam 3 nos. 8 Coastal Area / Estuary Area 47 km Arch Dam 3 nos. Jetty 8 km Special Large Dam 16 nos. Coastal groin 15 km 2 Medium Size Dam (height < 135 nos. Wave dissipation 24 km 15m, Storage volume >500 km 3 ) IV. RAW WATER SUPPLY Multi-purpose Rockfill and 1 nos. 1 Intake 45 nos. Earthfill Dam Capacity (more than 5 m 3 /s) 25 nos. Single-purpose Rockfill and 133 nos. Capacity (less than 5 m 3 /s) 20 nos. Earthfill Dam 2 Open Channel 167 km Concrete Gravity Dam 1 nos. Capacity (more than 5 m 3 /s) 110 km 3 Rubber Dam 34 nos. Capacity (less than 5 m 3 /s) 57 km 4 Embung 699 nos. 3 Closed Channel 21 km Storage volume > 100,000 m nos. Capacity (more than 5 m 3 /s) 0 km Storage volume < 100,000 m nos. Capacity (less than 5 m 3 /s) 21 km Source: Proceedings of Workshop on Asset Management for Hydraulic Infrastructure, 2002, MPW and BAPPENAS Republic of Indonesia March 2010

154 (4) Suggested Performance Indicators in Water Resources Sector BAPPENAS instructed each ministry/agency to formulate performance indicators to measure the achievements of various activities under RPJM and Renstra for 2010 to The performance indicators consist of the output, outcomes and impact indicators. The following performance indicators are suggested to be adopted in the water resources sector: Table Suggested Performance Indicators in Water Resources Sector Major Programs Output Outcomes Impact Water resources development No. of dams/embung Newly developed storage volume (million m 3 ) Benefit area for water supply (ha) or number of Rehabilitation/O&M of water resources facilities Raw water supply for DMI Flood control (river improvement) Flood control (reservoir, retarding basin) Coastal protection Rehabilitation/O&M of river facilities Rehabilitation/O&M of coastal protection facilities Source: JICA Study Team No. of facilities subject to rehabilitation/o&m Increased raw water supply capacity (m 3 /sec) River improvement length (km) No. of dam and retarding basin Length of coastal protection (km) River length subject to rehabilitation/o&m (km) Coastal length subject to rehabilitation/o&m (km) Storage volume subject to rehabilitation/o&m (million m 3 ) Increased water volume on daily basis (m 3 /day) Protected area (ha) or mitigated flood damage (billion Rupiah) Protected area by reservoir (ha) and flood control volume in retarding basin (million m 3 ) Protected area (ha) Protected area subject to rehabilitation/o&m (ha) Protected area subject to rehabilitation/o&m (ha) beneficiary (persons) Benefit area for rehabilitation (ha) or number of beneficiary (persons) Number of beneficiary (persons) Number of beneficiary (persons) or number of protected houses (houses) Number of beneficiary (persons) or number of protected houses (houses) Number of beneficiary (persons) or number of protected houses (houses) Number of beneficiary (persons) or number of protected houses (houses) Number of beneficiary (persons) or number of protected houses (houses) (5) Action Plan in Irrigation Sector 1) Main roles of irrigation infrastructure development The main roles of irrigation infrastructure development are to: i) achieve food security, and ii) reduce the economic gap, including poverty alleviation. The acceleration of irrigation infrastructure development corresponds to the mission statements of the national long-term development plan, to wit: To realize a safe, peaceful, and united Indonesia and To realize an even and fair distribution of development. Since its independence in 1945, the Indonesian government has been making great efforts in irrigation infrastructure development in order to attain food security and self-sufficiency. Irrigation infrastructure is the most important agricultural infrastructure to sustain stable food supply. Consequently, irrigable areas have increased steadily since the 1970s. Figure shows the increase of paddy production, paddy harvested area, yield and population since 1970 (1970=100). 3 Preparation Guidelines, National Mid-Term Development Plan (RPJM) , 2009, BAPPENAS Republic of Indonesia March 2010

155 = Source: FAOSTAT Harvested area Paddy yield Paddy production Population Harvested area per capita Figure Paddy Production, Harvested Area, Yield and Population Based the above figure, the total production doubled since 1970, to catch up with the population growth. Increase of yield is a major factor which contributed to the increase in production which is 2.8 times from However, the harvested area has increased only to about 1.5 times. Irrigation infrastructure is the contributory factor to the increase of yield and harvested area. Figure presents the relationship of the ratio of irrigated area and average yield by province harvested area per capita (ha/capita) 7 6 Java-Bali Yield of Paddy (t/ha Kalimantan Sumatra Sumatra Java-Bali Nusa Tenggara Kalimantan Sulawesi Maluku & Papua 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Ratio of Irrigated Area Sulawesi Nusa Tenggara Maluku & Papua Source: Statistical Yearbook 2008, BPS Figure Relation of the Ratio of Irrigated Area and Average Paddy Yield by Province Although there are some differences by island, it can be concluded that the trend of high ratio of irrigated area resulted in high yield. Republic of Indonesia March 2010

156 Paddy yield was low (less than 3.0 t/ha) in some provinces in Kalimantan and Sumatra (West Kalimantan, Central Kalimantan, Bangka Belitung, Riau Island),. The reasons of low yield in these provinces are presumed to be as follows: 1) Low paddy cultivation skill; 2) Low application of fertilizer; and 3) Low application of high yield variety. 2) Priority Issues for the Next Five Years The recommended priority issues for the next five years in the irrigation sector, taking into consideration the remaining issues mentioned in item (6) in sub-section 4.4.3, are as follows: (a) Rehabilitation of existing irrigation scheme and establishment of institutions for O&M Rehabilitation of existing facilities is the highest priority issue since around 24% of the existing irrigation facilities is not functioning well as described in Item 3) of (6) of this sub-section. Likewise, capacity development for the local government staff and WUA on O&M for irrigation facilities should be implemented in line with the rehabilitation works. The demarcation in implementation level of the central government, local government and beneficiaries should be well-defined. The inventory survey on existing facilities and establishment of database should be prioritized in order to formulate an effective rehabilitation program and evaluation outcome of the activities. (b) Extension and development of irrigation scheme in outer Java and formulation of regulations to control land conversion to industrial and urban area in Java In Java, productive agricultural land (1.7 times against outer Java) has been reduced due to conversion of land use to industrial and urban area. The extension and development of irrigation scheme should be implemented immediately in order to secure the required paddy production in national level. In parallel, formulation of zoning ordinance (spatial plan) or others regulations to secure agriculture land against urbanization and industrialization should be done. (c) Modernization of existing irrigation schemes in Java for saving water and water management Java experiences deficiency of water balance due to high demand and limited water resources. Water use ratio for agriculture (86% of total use at present) should be reduced and shifted to DMI because it is difficult to find suitable location to develop new water resource (such as large dam) to match the increase in water demand for domestic, municipal and industry (DMI) in the future. Promotion of water saving irrigation project such as reducing conveyance loss, efficient water management should be implemented. In addition, more high value crops should be promoted to increase the farmers income around main cities. Moreover, improvement of farm land condition (drainage facilities, farm road, etc.) should be constructed in order to realize crop diversification. Republic of Indonesia March 2010

157 (d) Adaptation to climate change Although a more detailed research is required to assess the impact of climate change on agriculture productivity, extension of irrigation infrastructure in rainfed paddy fields and increase in water storage should be executed as a countermeasure for adaptation to climate change. 3) Logframe on Irrigation Sector for Next RPJM A preliminary logframe and the proposed performance indicators are prepared by the Study team as the action plan for the next RPJM. Table Logframe and Proposed Performance Indicators on Irrigation Sector Narrative Summary Proposed Performance Indicator Overall Goal 1. Realizing and sustaining food sufficiency 2. Reduction of economical disparity between urban and rural, as well as among regions Objective 1. Increase and stabilization of paddy production 2. Poverty reduction in rural area Sector Priority Issue 1. Rehabilitation of existing irrigation scheme 2. Expansion of irrigation area and an increase in paddy productivity in outer Java taking population growth and reducing of paddy field in Java into consideration 3. Establishment and strengthening of institutions for O&M of irrigation system 4. Increase in farmers income and reduction of economic gap 5. Alleviation of water conflict and adaptation of climate change Impact Indicator 1-1 Food sufficiency ratio (%) 1-2 Stock amount of rice in Indonesia (ton) 2. GRDP per capita by province (Rupias per capita) Impact Indicator 1-1 Incremental paddy production (ton) 1-2 Incremental cropping intensity of paddy (%) 1-3 Incremental harvested area (ha) 2. Ratio of people under poverty line in rural area (%) Outcome Indicator 1-1 Incremental actual irrigated area in the existing irrigation scheme (ha) 1-2 Functionality ratio of irrigation scheme (%) 2-1 Incremental actual irrigated area newly developed (ha) 3-1 Coverage ratio of tertiary block area managed by established WUA (%) 3-2 Functionality ratio of irrigation scheme (%) 3-3 Program performance of government O&M staff training and WUA empowerment 4-1 Increase in average farmers income 4-2 Ratio of GDP per worker in agriculture sector vs. that in other sectors (%) 5-1 Ratio of water utilization amount for agriculture (%) 5-2 Incremental water storage volume (m 3 ) Republic of Indonesia March 2010

158 Priority Activities 1. Rehabilitation of existing irrigation system 1-1 Conduct of inventory survey for existing irrigation schemes and establishment of database 1-2 Formulation of rehabilitation program, including preparation of criteria for selection of priority projects 1-3 Establishment of asset management for reduction of life cycle cost 1-4 Implementation of rehabilitation works 1-5 Modernization of existing irrigation schemes in Java to increase crop productivity and water productivity 2 Expansion of irrigation area and increase in paddy productivity in the outer Java taking into consideration population growth and reducing of paddy fields in Java 2-1 Formulation of law or regulation to control conversion of productive paddy fields to urban and industrial areas in Java 2-2 Projection of future food balance and estimation of required irrigation development 2-3 Extension and development of new irrigation areas in outer Java 2-4 Support of agriculture extension service in outer Java 3. Establishment and strengthening of institutions for O&M 3-1 Establishment of institution for O&M under new framework at the operations level 3-2 Making clear demarcation of each institution at the operational level 3-3 Awareness in the creation of WUAs and capacity-building 3-4 Empowerment of provincial and district government staff on O&M activities 3-5 Optimization of O&M budget 3-6 Establishment of O&M performance monitoring and evaluation system 4. Increase in farmers income and reduction of economic gap 4-1 Prioritization of irrigation development in poverty areas 4-2 Infrastructure development, including post-harvest and marketing facility 4-3 Modernization of infrastructure to help mechanized farming practices to increase productivity 5. Alleviation of water conflict and adaptation of climate change 5-1 Modernization and improvement of existing infrastructure to save water conveyance losses (e.g. extension of canal lining) and water management losses (e.g. remote control gate operation system), especially in Java 5-2 Application and extension of on-farm level water management to save water at the field level 5-3 Construction and rehabilitation of water storage infrastructure 5-4 Extension of irrigation facility in rainfed paddy fields Source: JICA Study Team 3) Regional Development Strategy Rice is the staple food in Indonesia. However, the country s production has been fluctuating annually, and rice was imported constantly in the past. The demand for rice increases with the population increase. The prediction on the balance of rice consumption and supply of Indonesia for the plan period of RPJM 2, 2020 and 2025 is shown below. Republic of Indonesia March 2010

159 Table Prediction of Rice Consumption and Supply Item Unit RPJM 1 RPJM Population ('000 persons) 231, , , , ,988 Per Capita Rice Consumption (kg/person/year) Emergency Rice Stock in BULOG ('000 tons/year) 1,500 1,500 1,500 1,500 1,500 Total Rice Supply Requirement ('000 tons/year) 34,077 34,853 35,595 37,372 38,651 Supply by Imported Rice ('000 tons/year) Conversion Factor (Milling rate + Post-harvest losses) Total Paddy Supply Requirement ('000 tons/year) 60,207 61,577 62,888 66,028 68,289 Upland Paddy Supply ('000 tons/year) 3,191 3,264 3,333 3,499 3,619 Seeds for Self-stocked ('000 tons/year) ,024 Wetland Paddy Production Requirement ('000 tons/year) 57,919 59,237 60,499 63,519 65,694 Sources: Assumptions - Population: PBS up to 2014 and FAO for 2020 & 2025 with adjustments based on BPS 2015 projection. - Per Capita rice consumption = kg/person/year: Recommended figure by Department of Agriculture. - Emergency rice stock of 1,500 tons/year: Presidential Instruction - Conversion factor: Data from Department of Agriculture and BULOG - Total paddy supply in 2009; forecast. - Upland paddy supply: assuming quantity equivalent to 5.3% of total paddy supply requirement. - Seeds for self stocked: assumed on the basis of Department of Agriculture statistics. The paddy field area consists of irrigation service area, rainfed area and swampy area. The total paddy field area in 2009 is estimated to be 8.05 million ha, and the annual total harvested area of paddy is 11,552 thousand ha with a total production of 57,919 thousand tons in 2009, along with the estimated figures of the respective regions as shown below. Table Existing Irrigation Service Area, Rainfed Area and Swamp in Description Existing Irrigation Service Area Swamp Rain- Supplement irrigated others Not & fed Good Better Total ('000 ha) ('000 ha) ('000 ha) ('000 ha) ('000 ha) ('000 ha) ('000 ha) Indonesia Physical area 2,297 1, ,670 1,080 8,052 Harvested area 4,594 2, ,670 1,080 11,552 Cropping intensity Paddy yield (ton/ha) Production ('000 ton) 25,434 15,908 3,990 1,933 6,992 3,662 57,919 Sumatra Physical area ,426 Harvested area ,022 Cropping intensity Paddy yield (ton/ha) Production ('000 ton) 3,636 2,940 2, ,728 2,189 13,297 Java Physical area 1, ,214 Harvested area 2,932 1, ,393 Cropping intensity Paddy yield (ton/ha) Production ('000 ton) 17,182 9, , ,740 Republic of Indonesia March 2010

160 2009 Description Existing Irrigation Service Area Swamp Rain- Supplement irrigated others Not & fed Good Better Total ('000 ha) ('000 ha) ('000 ha) ('000 ha) ('000 ha) ('000 ha) ('000 ha) Bali & N. Tenggara Physical area Harvested area Cropping intensity Paddy yield (ton/ha) Production ('000 ton) 910 1, ,964 Kalimantan Physical area Harvested area ,067 Cropping intensity Paddy yield (ton/ha) Production ('000 ton) ,113 1,367 3,948 Sulawesi Physical area Harvested area ,403 Cropping intensity Paddy yield (ton/ha) Production ('000 ton) 3,182 1, ,733 Maluku & Papua Physical area Harvested area Cropping intensity Paddy yield (ton/ha) Production ('000 ton) Note: Estimated by the JICA Study Team on the basis of the data in 2005 of Department of Public Works and Department of Agriculture/BPS Modernization and rehabilitation of existing infrastructures will be required for the area classified as supplemental irrigation and/or non-irrigated area, and development will be carried out for the rain-fed area. It is difficult to achieve self-sufficiency without adequate rehabilitation and improvement of existing irrigation schemes, and development of irrigation area. Regional development strategy for irrigation development in each region is briefly described below. Sumatra Region The rice production in the Sumatra Island is surplus. This region serves as the supplier of rice to rice deficit regions such as Java and Bali. There are some uncompleted irrigation systems in this region wherein the headworks have not been completed, or existing irrigation systems requiring urgent rehabilitation/modernization. The development strategy in this region is as follows: Promotion of the rehabilitation/upgrading of irrigation systems to effectively utilize the remaining irrigation development potential and to maintain/increase the productivity in the existing irrigation systems; and Promotion of the dam irrigation project by use of available water and land resources in the rain-fed area. Java Region Java occupies 3.21 million ha of paddy fields of irrigation service area and rain-fed area equivalent to 46.0% of the whole Indonesia paddy fields. The estimated paddy production for 2009 is Republic of Indonesia March 2010

161 million ton corresponding to 56.6% of the total production of million ton of the country. While the majority of rice production of Indonesia rests upon Java Island, the available water in the dry season is insufficient for the demand of domestic-industry-irrigation as shown in the preliminary water balance. Furthermore, the irrigation area is being reduced continuously with an average annual rate of 18,000 ha due to the urbanization. The development strategy in this region is as follows: Prioritization of the rehabilitation and upgrading of the existing irrigation system and management/improvement to maintain the present high productivity and to improve the water use efficiency; and Promotion of the improvement and modernization of the large scale irrigation projects served from the dam reservoirs - Water resources are limited in Java during the dry season. Effective utilization of the reservoir water is most important to increase the rice production sufficiency rate in Java under severe water balance situation. Bali & Nusa Tenggara Region Rice production in this area is insufficient to meet the consumption mainly because the irrigation area is not extensively developed although the unit yield of rice is relatively high. The per capita income in this region is lowest in Indonesia, thus the percentage of people under the poverty line both in the rural and urban areas are highest in this region. Special attention should be given to this region for creating job opportunities in a sustainable way to improve poverty and regional gaps. Irrigated agriculture is one of the most suitable measures in this region. The strategy in this region is as follows: Upgrading/modernization of existing irrigation systems to increase the self sufficiency rate of rice should be promoted; and Promotion of dam irrigation project to utilize the limited water resources in the rainy season. Kalimantan Region The irrigation area in this region has not been widely developed, although the water resources and land resources (in the form of rain-fed paddy field) are abundant. The development and improvement of irrigation system is required to increase the self sufficiency rate of rice. The development strategy in this region is as follows: Promotion of small- to medium-scale irrigation development; and Upgrading/modernization of the existing system. Sulawesi Region This region is playing an important part in supplying rice to the rice-deficit area like Java region. The available water is surplus in the dry season and the paddy fields under rain-fed condition are still left extensively. The development strategy in this region is as follows: Promotion of remaining irrigation development potential by means of dam irrigation projects; and Republic of Indonesia March 2010

162 Rehabilitation/upgrading of the existing irrigation systems to keep its position as the rice-supplying region. Maluku and Papua Region Rice produced in this region is less than the amount needed for consumption because irrigation system has not been well developed so far and, thus, productivity is very low. Furthermore, the percentage of people under the poverty line in the rural area is highest in Indonesia. From these situations, the implementation of irrigation development should be prioritized to increase the self-sufficiency rate of rice and the farmers income. The development strategy in this region is as follows: Promotion of small- to middle-scale development to improve self-sufficiency condition and the rural economic development Priority Focus Areas of Water Resources Infrastructure Development for Next RPJM (1) Policy Direction and Strategies in Water Resources Sector for RPJM The goals of water resources infrastructure development was set out for the next RPJM based on the remaining issues of RPJM as discussed in Sub-section 4.4.3, as follows: i) Increasing of the capacity of water storage supported by sustainable management of water resources; ii) Optimization of water allocation with the fulfillment of basic needs of society and productive activities, and effective and efficient utilization of water; iii) Disaster prevention for water resources infrastructure, reduction of the impacts of disaster due to damaged water resources and restoration of the environment and water resources infrastructure systems in the post-disaster period; iv) Increasing the capacity of institutions in water resources management and empowerment of stakeholder to improve the performance management of water resources; and v) Increasing of availability and transparency of data and information of water resources. The following table presents the draft policy direction and strategies to achieve the goals mentioned above for the next 5 years in : Republic of Indonesia March 2010

163 Table Policy Direction and Strategies of Water Resources Infrastructure Development for Next PRJM Policy Direction Strategies 1. Improvement and preservation i) Development of upstream-downstream relations of function and sustainability of ii) Control the system s conjunctive use of surface water utilization and water resources utilization to ground water ensure adequate availability of iii) Acceleration of development of small and medium scale water reservoir, water in both quantity and especially in the area south of the equator and the strategic area quality iv) Control of water pollution by increasing the monitoring of water quality to control domestic and industry waste disposal 2. Utilization of water in a sustainable manner (Optimal utilization and development of irrigation networks) 3. Utilization of water resources to ensure raw water requirement for households, urban areas and industries 4. Control and mitigation of impacts to infrastructure due to floods, volcanic eruption and coastal abrasion, and climate change i) Development of new irrigation areas with priority outside Java ii) Optimization of the irrigation system infrastructure iii) The increased function of the irrigation network has been built but not yet functioning, and done only in the area of guaranteed availability of water and farmers, with priority irrigation areas outside Java iv) The rehabilitation of the irrigation area that has been damaged, but functioning, especially in the reliability areas of rice v) The implementation of eco-efficient system, with the reduction of non-revenue water, water rationalization charge, implementation of the system of agriculture water efficiently, encourage re-use (reuse) and recycling water drainage, and increasing the reliability of irrigation services vi) Policies that encourage farmers to maintain the agricultural function of land i) The fulfillment of basic household needs, especially in areas prone to water deficit, less developing areas, and strategic areas ii) The use of groundwater will be controlled and managed in line with the increased effort to use surface water iii) Development of water storages as basic source of water and optimizing existing raw water sources by increasing operation and maintenance iv) To develop the processing technology of water quality and implement the principles of recycle, reuse and reduce v) To encourage the role of the private sector in financing infrastructure development, especially in raw water distribution through water conveyance infrastructures i) Approach to flood management (prevention, response and handling) flood hazard ii) Improve the performance of flood control infrastructure to optimize operations, maintenance and rehabilitation iii) Encourage the policy to develop retention / retarding basin areas as water parking areas iv) Encourage and develop policy incentives - disincentive between regions upstream - downstream in flood prevention Republic of Indonesia March 2010

164 Policy Direction 5. Increasing of performance of water resources management through establishment of institutions related to the management of water resources and human resources capacity 6. Increasing the provision and accessibility of data and information on water resources Source: Draft RPJM , Water Resources, August, 2009 Strategies i) Encourage the acceleration of the government regulation with the implementation of Law No. 7 of 2004 as a guide of the technical implementation of water resources ii) Improve communication skills, cooperation, and coordination between and among the existing institutions, and coordination of water resource management iii) Increased institutional capacity of water resources and increased community participation and empowerment, especially in the district / city level iv) Initiate and increase community participation in the management efforts for water resources through guidance, counseling and guidance v) Organizing efforts management of water resources with a system of partnership between the government and the community i) Encourage the network of information in water resources involving all stakeholders ii) Facilitate the provision of data which includes data on hydrology, hydrogeology, hydrometeorology, water resources infrastructures, and other supporting data such as: water resources policy and technology iii) Build and optimize the network database between all stakeholders and setting standards, modification, classification, process and methods / procedures of collecting data and information iv) Update the data regularly, collect data from the institutions and synchronize all related data v) Prepare and implement standard operating procedures of transparency and information of data to the community, and to improve information services to the communities (2) Program, Activity and Target of Water Resources Sector for RPJM According to BAPPENAS, finalization of the draft RPJM is scheduled on December 2009, through discussions with line ministries, provincial governments, regional governments, institutions, universities and NGOs (called MUSRENBANGNAS held on December 2009 according to Law No.25/2005 regarding National Development Planning System). After the finalization, the Presidential Regulation on RPJM will be enacted in January In parallel with the finalization process of RPJM , the next Renstra is also scheduled to be finalized. At the MUSRENBANGNAS, four priority programs and targets for water resources infrastructure development in the next five years were addressed as summarized below: Republic of Indonesia March 2010

165 Table Priority Programs and Targets of Water Resources Infrastructure Development for Next RPJM No. Program Target 1 Development, management and conservation of river, lake and other water resources 2 Development and management of irrigation networks, swamp irrigation networks and other water resources networks 3 Flood control, mudflow/sediment control and coastal conservation Construction of 19 dams and 160 embung/situ with a volume of 1.1 billion m 3. Preserve the availability of water with a volume of 12.5 billion m 3 Increase and maintenance of the services of 2.8 million hectares of irrigation networks, 1.75 million hectares of swamp irrigation networks and 46.8 thousand hectares of groundwater irrigation networks to support the national food security Undertaking of flood control in the Jakarta East Flood Canal and integrated Bengawan Solo River basin, which are national priority targets. Protecting the area of thousand hectares from flood hazards, 100 km coastal protection, and control 34 million m 3 of volcano mudflow/sediment 4 Supply and management of raw water Increase the availability of raw water with a capacity of 54.8 m 3 / sec, and maintain the availability of water with a capacity of 44.8 m 3 /sec to support the achievement of MDG s goals Source: Material of MUSRENBANGNAS, BAPPENAS, December 2009 The program, activities and output indicators were drafted by DGWR in terms of Renstra based on the priority programs and targets above, as summarized below. Table Activities and Output Indicators of Water Resources Infrastructure Development for Next RPJM Program Activity Output Indicator 1. Development, management and conservation of rivers, lakes and other water resources 2. Development and management of irrigation networks, swamp irrigation networks and other water resources networks 3. Flood control, mudflow/sediment control, and coastal conservation a. Development of reservoir/small reservoir/ other water 19 reservoirs, 160 small reservoirs/ storage other water storage, 1.1 billion m 3 b. Rehabilitation of reservoir/small reservoir/ other water 34 reservoirs/small reservoirs/other storage water storage, 4.5 billion m 3 c. O&M of reservoir/small reservoir/ other water storage 199 reservoirs/small reservoirs/other water storage, 12.5 billion m 3 d. Conservation of lakes and reservoirs and improvement 16 watersheds (river basins) of the greenbelt areas of watersheds 1. Irrigation: a. Development/Improvement of irrigation network 500,000 ha b. Rehabilitation of irrigation network 1,340,000 ha c. O&M of irrigation network 2,315,000 ha 2. Groundwater Irrigation: a. Development/Improvement of groundwater irrigation 6,000 ha network b. Rehabilitation of groundwater irrigation network 37,500 ha c. O&M of groundwater irrigation network 43,840 ha 3. Swamp Irrigation: a. Development/Improvement of swamp reclamation 550,000 ha network b. Rehabilitation of swamp reclamation network 450,000 ha c. O&M of swamp reclamation network 1,200,000 ha 1. Flood Control: a. Development of flood control facilities 1,000 km long, protected area 60,000 ha b. Rehabilitation of flood control facilities 750 km long, protected area 24,700 ha c. O&M of flood control facilities 2,000 km long, protected area 37,700 ha 2. Mudflow/Sediment Control: Republic of Indonesia March 2010

166 4. Supply and management of raw water a. Development of sediment/mud control facilities 100 facilities, control volume of 16 million m 3 b. Rehabilitation of sediment/mud control facilities 85 facilities, control volume of 6 million m 3 d. O&M of sediment/mud control facilities 150 facilities, control volume of 12 million m 3 3. Coastal Protection: a. Development of coastal protection facilities 100 km b. Rehabilitation of coastal protection facilities 50 km c. Maintenance of coastal protection facilities 50 km 1. Raw Water Supply: a. Development/Improvement of raw water unit 54.8 m 3 /s b. Rehabilitation of raw water unit 12.4 m 3 /s c. O&M of raw water unit 44.8 m 3 /s 2. Groundwater water supply: a. Development/Improvement of raw groundwater unit for 0.25 m 3 /s drinking water b. Rehabilitation of raw groundwater unit for drinking 0.60 m 3 /s water c. O&M of raw groundwater unit for drinking water 0.55 m 3 /s Source: 6 th version Renstra, MPW, October 2009 (3) Priority Focus Areas for Water Resources Infrastructure Development for RPJM As discussed in Sub-section 2.3.5, three focus areas of infrastructure investment are proposed for the next five years of infrastructure development. These are: i) building strong backbone infrastructure, ii) upgrading infrastructure in the main cities, and iii) provision of basic infrastructure services in depressed areas for improved economic opportunities. The main objective of the development of water resources infrastructure is to contribute to nationwide social welfare and support to both regional and national economic developments. In this sense, water resources infrastructure is one of the lifelines of national infrastructure. These focus areas under Renstra would be addressed based on the aspect of water resources infrastructure sector, as follows: a. Building strong backbone infrastructure mainly in Java, Sumatra and Sulawesi Sustainable water resources development and management Development and improvement of raw water supply capacity Flood control and disaster management b. Upgrading infrastructure in the main cities, namely Java, Sumatra and Sulawesi Upgrading of flood protection level of urban rivers as climate change adaptation measure Promotion of drainage improvement in urban cities Upgrading of urban river environment c. Provision of basic infrastructure services in depressed areas for improved economic opportunities in the whole Indonesia especially in Nusa Tenggara Development of small scale reservoir and water storage facilities for irrigation and domestic water supply in the dry Nusa Tenggara area Republic of Indonesia March 2010

167 Rehabilitation of deteriorated river and water supply facilities with priorities for implementation in the whole of Indonesia Recent analysis for the Southeast Asia region suggests that Indonesia is highly vulnerable to various aspects of a warming climate 4. The eastern and western portions of densely-populated Java, the coastal regions of much of Sumatra, parts of western and northern Sulawesi, and southeastern Papua islands all rank highly subject to the multiple climate hazards. These areas are susceptible to all major climate change risks such as drought, floods, landslides and sea-level rise. Moreover, food security in Indonesia would be threatened by climate change. The major concern for Indonesia with regards to the impacts of climate change is the risk of decreased food security. Climate change will alter precipitation, evaporation, river discharge and soil moisture. Hence, it will have effects on agriculture and, ultimately, on food security. Climate change will also increase the average sea level due to increased volume of the sea water caused by the melting of polar ice caps. Around 41 million people live within ten meters of the average sea level. They are the most vulnerable to sea level changes. Sea level rise will inundate productive coastal zones; and thereby, will reduce farming and coastal livelihoods. MPW has established a National Action Plan for Climate Change Mitigation and Adaptation in Public Works Infrastructure. Projects from the viewpoints of climate change adaptation should be addressed in line with the three focus areas above. Promising activities are: Upgrading of flood protection level of urban rivers in Java and Sumatra; Flood control and disaster management for disaster vulnerable areas; and Coastal management by means of coastal protection and beach conservation in Java, Sumatra, Sulawesi, Bali and Nusa Tenggara. Many mitigation and adaptation measures should be contemplated and implemented for the next RPJM to reduce the country s vulnerability to climate change which will need to be phased and prioritized according to the magnitude of investments, benefits and risks. (4) Priority Focus Areas for Irrigation Sector Development for RPJM In the RPJM (draft), the development of the irrigation sector is aimed to support national food security with activities focused on the development and management of irrigation system for the target area of 2.80 million ha and improvement and maintenance of the irrigation services. The output indicators for the irrigation program are described below. Development/increase of irrigation network to irrigate the area of 500 thousand ha; Rehabilitation of irrigation network in the area of 1.34 million ha; and Improvement of O&M of irrigation network for the area of 2.32 million ha. The following irrigation development and management projects are prepared with reference to the regional development strategies, in order to attain the target outputs of the irrigation program 4 Country Environmental Assessment, Chapter 6: Adapting to a Changing Climate, 2009, World Bank Republic of Indonesia March 2010

168 mentioned above: (a) Project Assistance (i) Modernization and Upgrading for Sustainable Irrigation Development and Management Project consisting of sub-projects such as: Urgent rehabilitation and/or modernization of existing irrigation systems for which headworks and canal systems have been completed, but the facilities are functioning less due to damages, superannuation, insufficient O&M, etc.; and Urgent rounding-up of existing irrigation systems for which the headworks and main canal system are completed, but the extension work remains uncompleted (ii) Modernization and Improvement of Existing Strategic Large-Scale Irrigation Projects in Java Rentang Irrigation Modernization Project with an area of 87, 000 ha The Rentang Irrigation Project is facing the lack of irrigation water source. The Jatigede Dam, which is the water source of Rentang Irrigation Project, is being implemented, and scheduled to be completed in the near future. Jatilhul Irrigation Project with an area of 240,000 ha (iii) Dam Irrigation Development Project Komering-3 with dam construction for extension area of 9,000 ha Small dam irrigation development projects in Bali and Nusa Tenggara Region Small dam irrigation development projects in Sulawesi Region Dam irrigation development projects in Kalimantan Region (b) Technical Assistance (i) Formulation of Irrigation Development and Management Program for Food Security Increase of rice production to attain self-sufficiency relies upon the irrigation development especially in Java, Sumatra and Sulawesi as well as on agricultural intensification programs. The JICA Study for Formulation of Irrigation Development Program (FIDEP) in the Republic of Indonesia was carried out in 1993, providing the irrigation development frameworks and strategies. Subsequently, natural, social and institutional conditions have changed; and hence, there is a need to prepare the new irrigation development frameworks and strategies Recommendation of Projects to be Listed in the Next Blue Book (1) Listed Projects in the Blue Book A total of 39 projects were listed up as candidate projects for the water resources sector in the past Blue Book as well as in the 2008 Revisions (3 times) to achieve the priority targets set out in the RPJM as summarized below: Republic of Indonesia March 2010

169 Table Number of Projects of Water Resources Sector Listed in Blue Book ( ) Project Assistance (PA) Technical Assistance (TA) Water Resources Blue Book 2008 Blue Book 2008 Total Sub-sector Revisions Revisions Total Water Resources Development and Management Flood Control and Disaster Management Irrigation Development Coastal Protection Total Source: Project and Technical Assistance Proposals , Volume I Project Assistance Proposals, Volume II Technical Assistance Proposals. List of Medium-Term Planned External Loans and Grants , 2008 Revision, BAPPENAS Out of 39 projects above, 19 project for project assistance (PA) and 20 projects for technical assistance (TA) were selected for the projects to be funded by foreign loans and foreign grants. The expected fund requirement is US$1,512 million. (2) Requirements for Project Proposal for Blue Book According to the Technical Guidelines on Submission of Proposals for Project Financing by Foreign Loans and/or Grants Book I: General Guidelines published by BAPPENAS in 2006, the following documents are generally required in the project proposal for PA: Project Digest in terms of a simple sheet format Terms of Reference Feasibility Study Documents of the Project Project Implementation Plan Special Documents (if required) (3) Candidate Project List for the next Blue Book As of December 2009, candidate projects for the next Blue Book are still under preparation by DGWR. According to DGWR, the candidate projects list would be finalized around the end of January The following tables present the nominated candidate lists for project assistance (PA) and technical assistance (TA), which are identified by the Study Team based on the collected information from DGWR. It should be noted that these candidate projects are still at the preliminary level for evaluation by DGWR and are subject to further confirmation. Other candidate projects not listed below are likely to be added to the draft candidate projects list. Table Draft of Candidate List of Project Assistance for Next Blue Book as of December 2009 No. Project Title Location Counterpart Loan Funding (US$ 000) (US$ 000) 1 Countermeasure for Sediment in Wonogiri Central Java 51,133? Multipurpose Dam Reservoir Slice II 2 Lau Simeme Multipurpose Dam Development Project North Sumatra 11,200? 3 Urban Flood Control System Improvement in Selected Cities Phase II Nationwide 100,000? Republic of Indonesia March 2010

170 No. Project Title Location Loan (US$ 000) Counterpart Funding (US$ 000) 4 Bali Beach Conservation Project Phase II Bali?? 5 Urgent Rehabilitation of Strategic Irrigation System in Nationwide?? Indonesia 6 Paselloreng Dam of Gilirang Irrigation Project South Sulawesi?? 7 Construction of Karalloe and Associate Structures South Sulawesi 53,261 27,174 8 Padng Flood Control Phase III Padang 79,512-9 Cisadane River Urgent Improvement Project, Stage I West Java?? 10 Upper Citarum River Basin Tributaries Flood West Java 40,000 4,000 Management 11 Construction of Cipanas Multipurpose Dam West Java 115,640? 12 Urgent Construction on Jambi City Flood Control Jambi 7,092 1,064 Mitigation 13 Urgent Construction and Rehabilitation of Water Maluku 11,600 1,740 Supply for Ambon City in Maluku Province 14 Lower Solo River Improvement Project Phase II Stage 2 East Java 100,000 10, Integrated Pamukulu River Basin Development Project South Sulawesi 63,000? Phase I 16 Construction of Raknamo and Temef Dams for Water NTT 86,000? Resources Development in NTT Province 17 Pandanduri Dam Irrigation Project NTB?? 18 Rationalization and Modernization of Strategic Central Java,?? Irrigation Schemes for Enhancing Food Security in Java (RAMSIS) East Java, West Java, 19 Urgent Rehabilitation of Strategic Irrigation Schemes in Western Indonesia (URSIS)?? South Sumatra, West Sumatra, North Sumatra, Lampung, Bengkulu Riau, South Kalimantan 20 Rentang Irrigation Modernization Project West Java?? 21 Project for the Urgent Re-construction of East Pump Jakarta?? Station of Pluit in Jakarta in the Republic of Indonesia Source: JICA Study Team, based on collected information from DGWR Table Draft of Candidate List of Technical Assistance for Next Blue Book as of December 2009 No. Project Title Location Counterpart Grant Funding (US$ 000) (US$ 000) 1 Integrated Regional Water Resources Development West Timor 1, and Disaster Management Sector Project in West Timor 2 Integrated Water Resources Management in Jakarta, Banten, 5, JABODETABEK and its Surrounding Area West Java 3 Cisadane River Improvement Project West Java?? 4 Nationwide Study on New Multipurpose Dams in the Nationwide?? Republic of Indonesia 5 Coastal Management Project in Indonesia Nationwide 5,000? 6 Establishment of O&M Manual of Strategic Nationwide?? Irrigation Schemes in Indonesia 7 The Influences of Climate Change on Coastal Protection Planning and Policies in Indonesia Nationwide?? Republic of Indonesia March 2010

171 No. Project Title Location Grant (US$ 000) Counterpart Funding (US$ 000) 8 Feasibility Study, Detailed Design and Construction Southeast 2, of Pelosika Dam Sulawesi 9 Study on Adaptation Strategies for Climate Change Central and East 5,000? Impact for 2 River Basins (Brantas and Bengawan Solo) Java 10 Beach Conservation Project Nationwide 5,000? 11 Integrated Water Resources Management in Bali Bali 4, Comprehensive River Water Management of the Jambi 3, Batang Hari in Jambi Province 13 Comprehensive Study on Tondano-Lemebeam- Lekpang Water Resources Management in North Sulawesi North Sulawesi 4, Technical Assistance for Curug Irrigation Pumping Station and Jatiluhur Hydroelectric Power Plan 15 Feasibility Study and Detailed Design of Tukad Ayung Multipurpose Dam 16 Study on Project of Integrated Water Resources and Flood Management for River Basins of Pemali-Juana and Others in Northern Central Java West Java 4,158 - Bali 1, Central Java?? 17 Urban Flood Control in Cirebon City West Java 3,650? 18 Water Quality Management and Water Resources of West Java 3, the Upper Citarum River Basin 19 Preparation of a Databank for Coastal Protection and Nationwide 3, Management 20 Preparation of National Lowland Management Nationwide 34,000 5,100 Strategy 21 Formulation of Irrigation Development and Management Program for Food Security in the Republic of Indonesia Nationwide?? Source: JICA Study Team, based on collected information from DGWR (4) Preliminary Selection Criteria for Evaluation of Candidate Projects Along with the finalization of Renstra , DGWR will officially submit the candidate project list for the next Blue Book in line with the finalized policy direction, strategies and activities designated in the next Renstra In this sense, it is assumed that all of the selected candidate projects for the Blue Book are fully in compliance with the national development policy and strategies of the next RPJM , as well as with various sector development programs to be implemented under the next Renstra According to the Technical Guidelines on Submission of Proposals for Projects Financing by Foreign Loans and/or Grants Book I: General Guidelines published by BAPPENAS in 2006, foreign sources of funding are required for accelerating the achievement of national development targets with priorities indicated in RPJM. This is mentioned in the Foreign Loan Requirement Plan (RKPLN) prepared by BAPPENAS and the Ministry of Finance. Although no project digests of candidate projects are available at this moment, it is proposed that the selection of candidate projects be made based on the following priorities for respective development programs. Republic of Indonesia March 2010

172 Urgency of project Number of people to be benefited Economic viability - for building strong backbone infrastructure and upgrading infrastructure in the main cities; EIRR higher than 12% - for provision of basic infrastructure services in depressed areas for improved economic opportunities; preferably EIRR higher than 12% Maturity of project (F/S or D/D have been finished or not) Social issues due to project implementation (Number of affected people, EIA has been completed or not, LARAP has been finished or not) Aspects of contribution to: - Effective and efficient utilization of water - Poverty alleviation and equitable growth mechanism (for provision of basic infrastructure services in depressed areas for improved economic opportunities) - Climate change adaptation Appropriateness for international cooperation from the aspect of technical difficulty The table below shows a sample of evaluation criteria in terms of weighting of categories. Table Sample of Evaluation Criteria on Categories, Weight and Scoring Category Weight Point: Urgency of project 30% Low Between Medium Between High items 1 and 3 items 3 and 5 2 Number of people to 20% < 1,000 1,000 to 10,000 to 50,000 to > 100,000 be benefited 10,000 50, ,000 3 Economic viability 10% < 5% 5% to 8% 8% to 10% 10% to > 12% 4 Maturity of project 10% Master plan Preliminary feasibility study 5 Social issues 10% EIA is planned to be executed 6 Aspects of poverty alleviation, effective utilization of water and climate change adaptation 7 Appropriateness for international cooperation Source: JICA Study Team Between items 1 and 3 10% Not included Between items 1 and 3 10% Conventional technology in Indonesia Between items 1 and 3 Feasibility study EIA is being executed Sub purpose Foreign support in reliability of applied technology 12% Basic design Between items 3 and 5 Between items 3 and 5 Between items 3 and 5 Detailed design EIA is completed Main purpose Application of new/high technology Republic of Indonesia March 2010

173 Final Report Appendix-1 Appendix-1 Procedures of Formulation of National Medium Term Development Plan (RPJM ) A1.1 Relevant Laws, Regulations, and Development Plans A1.1.1 Position of Medium-term Development Plan (RPJM) in the National Development Planning System The National Medium-Term Development Plan (RPJM) is defined by Law Number 25 of 2004 regarding National Development Planning System. The National Development Planning System, which covers the whole picture of national development planning consisting of Long-term, Mediumterm and Short-term (Annual) plans at both national and regional levels, was enacted in October The following table shows the list of each plan stipulated in the National Development Planning System. Table A1.1.1 List of National Development Plans defined in the National Development Planning System National level Regional level Period National Long-term Development Plan Regional Long-term Development Plan 20 years (RPJPN) (RPJPD) National Medium-term Development Plan Regional Medium-term Development 5 years (RPJMN) Plan (RPJMD) Strategic Plan of Ministries and Agencies Strategic Plan of Work Unit of the 5 years (Renstra-KL) Regional Government (Renstra-SKPD) Government Work Plan (RKP) Regional Government Work Plan (RKPD) 1 year Work Plan of Ministries and Agencies Work Plan of Work Unit of the Regional 1 year (Renja-KL) Government (Renja-SKPD) Source: JICA Study Team A1.1.2 How to Prepare Medium-term Development Plan (RPJM) There are descriptions in the National Development Planning System on how to prepare the Mediumterm development plan (RPJM). Summary of descriptions are as follows: Minister of BAPPENAS prepares the initial draft of the national RPJM. Chiefs of ministries/agencies prepare drafts of the Renstra-KL (Strategic Plan of Ministries/Agencies) based on the initial draft of the national RPJM. The draft of RPJM is used for the Development Plan Consultation Meeting (Musrenbang). The Musrenbang should be held not later than two months after the President s inauguration. Minister of BAPPENAS submits the final draft of RPJM to the cabinet based on the discussion result of Musrenbang. RPJM is enacted by means of a Presidential Regulation not later than three months after the inauguration of the President. The above procedures are as shown in the diagram in Figure A Republic of Indonesia A1-1 March 2010

174 Final Report Appendix-1 Diagram of Formulation RPJM National Previous year Presidential Election 2 months after Election 3 months after Election President Cabinet Meeting I Cabinet Meeting II Defined in Presidential Regulation BAPPENAS Technoratic Planning RPJP National Formulation of Draft Concept of RPJM National Draft Concept of RPJM National Draft of RPJM National Study Renstra-KL Midterm of Development Plan General Final Draft of RPJM National RPJM National Line Ministries / Institution Technoratic Planning Formulation of Draft Concept of Renstra- KL Draft of Renstra- KL Determination Renstra-KL Community Aspirations of community Vision Mission of Campaign Pledge Election Vision, Mission of Elected President Aspirations of stakeholder Region Perfomance of regional developmen Regional aspiration Formulation and revision of RPJM Regional Source: BAPPENAS Figure A1.1.1 Diagram for Formulation of RPJM A1.2 Relations of RPJM, Blue Book, PPP Book, etc. Figure A1.2.1 shows the financial structure for infrastructure development. FINANCIAL STRUCTURE FOR INFRASTRUCTURE GOVERNMENT PLAN Government Budget (APBN) Public Private Partnership (PPP) Ext ernal Loans/ Grants (PHLN) Blue Book RUPIAH PPP Book Source: BAPPENAS Figure A1.2.1 Financial Structure for Infrastructure Development In the government financial plan for infrastructure development, there are two conceivable sources of development funds. One is the central government budget and the other is private investment, including public private partnership (PPP) scheme. The central government budget is further divided into two categories, namely, (i) Rupiah budget and (ii) external loans/grants. For external loans/grants, a planning document called Blue Book is prepared, which contains information on activities and projects proposed by the state ministries/agencies, etc. The Blue Book is prepared to target a five year Republic of Indonesia A1-2 March 2010

175 Final Report Appendix-1 period, the same period as the RPJM. PPP Book is prepared by BAPPENAS and shows the list and outlines of projects, which have the potential to be realized as PPP projects. In Indonesian PPP practice, the funds for the public portion are either prepared by the government budget or by foreign loans. In case foreign loans are to be applied for PPP scheme, such project should also be listed in the Blue Book. There is a guideline called Submission of Proposals for Projects financed by Foreign Loans and/or Grants prepared by BAPPENAS. The Book I, General Guidelines gives a description of the entire process of planning, proposing of and monitoring of projects financed by foreign loans and/or grants. By referring to this document, the state ministries/agencies prepare a list of activities that are worthy of being financed by foreign loans/grants for the RPJM period. A1.3 Procedures and Schedule for Formulation of RPJM Figure A1.3.1 shows the schedule of RPJM preparation. Basic work items are as stipulated in the National Development Planning System. RPJMN RENSTRA Activity Forth year evaluation of RPJMN Summary of macro economics framework Working group meeting Formulation of 1st Concept Draft of RPJMN Collecting of community opinion Formulation of 2nd Concept Draft of RPJMN Formulation of Concept Draft of Renstra 2009 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Original Schedule Revised Schedule Bottom-up Formulatio Completed Completed Concept Draft of Renstra Completed Completed Completed Completed RKP 2010 Formulation and finalization of RKP 2010 Source: BAPPENAS Original (Dec.2008) 1st Draft Final Revised (Apr.2009) Figure A1.3.1 RPJM Formulation Schedule Republic of Indonesia A1-3 March 2010

176 Final Report Appendix-2 Appendix-2 Appendix to Chapter 3 A Sources of Infrastructure Investment The sources of infrastructure investment are becoming more diversified in Indonesia. The financial sources are broadly divided into public and private. In APBN, the public funds are classified as either Domestic Financing or International Financing. Under the framework, financial sources for infrastructure investments can be categorized as follows: Table A2.1.1 Funding Sources for Public Sector Projects Category Funding Source Types Examples of Sources a. General Budget - Tax Revenues b. Domestic Loan Domestic Bank Debt c. Bond Domestic Bank d. Public Grant - ODA (Bi/Multi) e. Loan ODA/OOF (Bi/Multi)/IIFF International Debt f. Bond Foreign Bank g. Equity - IFC/IIFF h. Loan Domestic Bank Debt i. Domestic Bond Domestic Insurance Company j. Equity - Domestic Investing Company Private k. Loan Foreign Bank Debt l. International Bond Foreign Insurance Company m. Equity - Foreign Investing Company Source: JICA Study Team a. Public-Domestic Source Regarding the Public-Domestic source, the first source is the general budget (tax and non-tax revenues). Government s debt through loans and bonds is often used to cover the budget shortage. The following figure shows the trend of the government s debt after Source: MOF Figure A2.1.1 Trend of Government Financing (Borrowing) Republic of Indonesia A2-1 March 2010

177 Final Report Appendix-2 Increasing the share of domestic financing in total government debt is President Yudhoyono s basic policy and the share of international borrowing is decreasing in recent years 1. In an article from a domestic press, an economist points out that foreign debt is considered by GOI only as the last option to cover deficit 2. Along with the above-mentioned Presidential policy, loans from the domestic banks are becoming active in recent years. For example, there is information that twenty three regional banks have signed a commitment to provide a total of Rp trillion in loans to the state electricity company PLN's 10,000 MW electricity program, which consists of 13 coal-fired projects 3. Financing through government bonds is also increasing in recent years as shown in the following figure. Source: MOF Figure A2.1.2 Amount of Government Financing through Bond (NET) It is considered that improvement of the credit rating of Indonesia, which is discussed in Chapter 2, helps to increase the issuance of the national bonds. b. Public-International Source The Public-International source is classified into grants, debt (loan and bond) and equity. In this source, loan is still a major source of infrastructure funding. It is in the forms of ODA and OOF. The institutions which provide funds can be either bilateral or multilateral agencies. In recent years, GOI tries to procure more funds through bonds in the international market. For example, in April 2009, GOI announced the issuance of Islamic bond and raises US$ 650 million from the global market. This has two important implications. One is GOI enlarges its option of raising funds through issuance of bonds in the international market. The other is that it adopts the Islamic financing. Islamic financing is based on interpretations from the Koran. Its two central tenants are no interest can be earned on loans and socially responsible investing. The key difference from a financial perspective is the no-interest rule. Islamic financing method is becoming more popular in Indonesia 1 This is a quotation from Jakarta Post of June 17, Ibid 3 For details, see Jakarta Post of April 24, Republic of Indonesia A2-2 March 2010

178 Final Report Appendix-2 with a back ground of Middle-East s economic upraise. In June 2009, ADB announced that it has reached an agreement with the Islamic Development Bank (IDB) to set up Asia's first major multicountry Islamic infrastructure fund. It is expected by the organization concerned that this will provide infrastructure investments funds to Asian countries, including Indonesia. Infrastructure investment funds are also available in the form of equity, which is provided by organizations such as IFC and Indonesia Infrastructure Financing Facility (IIFF). IIFF is an organization which was newly established by GOI in 2009 with supports from several organizations, such as the World Bank and ADB. Under the scheme, IIFF receives funds from international organizations and foreign governments, and provides financial assistance in the form of long-dated debt instruments, equity, or guarantees for infrastructure projects4. GOI has been expanding its portfolio of funding sources, and it will in general decrease the total procurements cost of funds. But still, the role of public-international source is important in that it has following advantages in general: - Lower interest rates - Longer grace periods - Avoidance of market fluctuation risks, e.g. Interest rates, Exchange rates It will be more and more important to think about the best portfolio of financial source in each project. There is not general theory or rule for infrastructure project financing but GOI needs to seek for best combination of sources for each project. Considering above conditions, Public-International Source, including ODA, still is one of the attractive sources of finance. c. Private Source Regarding the Private Finance, it is also classified into Domestic and International, and both are further devided into Equity and Debt (Loan and Bond). Regarding the trend of investment, according to Indonesia Investment Coordinating Board (BKPM), direct investments to Indonesia, both domestic and foreign, have been increasing steadily since 1990s 5. Table A2.1.2 shows the trend in the domestic and foreign direct investments 6. 4 IIFF started operation in May 2009 with 30% of the stakes contributed by the government and the rest coming from the World Bank, ADB and other international financial institutions. In April 2009, ADB approved investment of up to US$140 million in IIFF to support infrastructure development in Indonesia. ADB provides funds to government-sanctioned infrastructure holding company PT Sarana Multi Infrastruktur (SMI) and the company will relend the loan to IIFF as subordinated debt. 5 For details, see BKPM s URL 6 These figures show investments for all sectors and are not limited to investments in infrastructure. Republic of Indonesia A2-3 March 2010

179 Final Report Appendix-2 Table A2.1.2 Trends of Private Direct Investments in Indonesia Source: BKPM As can be seen from the table, both domestic and foreign direct investments have been increasing. Especially, in 2007 and 2008 a sharp increase in foreign direct investment is observed. In recent years, GOI has greater expectation for direct investments in infrastructure. As mentioned in the Chapter 3, there is a significant gap between the necessary infrastructure investments and available government funds for According to BAPPENAS s estimate, Rp.1,429 trillion is necessary for the next five years but GOI can only afford 31% or Rp.451 trillion from its budget. The balance of Rp.978 trillion is expected to be covered from private fund. This means, approximately Rp. 200 trillion per year is to be sought from the private investor 7. In terms of private investment for infrastructure, its trend of investments in major sectors is shown in Figure A For reference, the national expenditure budget of GOI for 2008 is Rp trillion. Republic of Indonesia A2-4 March 2010